InterContinental Hotels Group PLC released interim results for the first half of the year ending June 30, 2023, and reveals information about a new brand with midscale conversion opportunities. Highlights include:
- H1 RevPAR up 24 percent year over year (YOY); further sequential improvement versus 2019 with Q1 up 6.8 percent and Q2 up 9.9 percent
- Americas H1 RevPAR up 11 percent YOY, EMEAA up 42 percent, and Greater China up 94 percent, reflecting the differing levels of travel restrictions that were still in place in H1 2022
- Average daily rate up 7 percent versus 2022, up 11 percent versus 2019; occupancy up 9 percentage points versus 2022, just 1.3 percentage points lower versus 2019
- Gross system growth up 6.3 percent YOY; net system size growth up 4.8 percent YOY
- Opened 21,000 rooms (108 hotels) in H1, up 40 percent more than H1 2022; global estate now at 925,000 rooms (6,227 hotels)
- Signed 34,200 rooms (239 hotels) in H1, up 11 percent more than H1 2022; global pipeline now at 286,000 rooms (1,931 hotels), up 2.9 percent YOY; 17,700 rooms (131 hotels) in Q2, up 7 percent ahead of Q1 and up 25 percent more than Q2 2022
- Fee margin of 58.8 percent, up 3.3 percentage points versus 2022 on trading recovery in EMEAA and Greater China
- Operating profit from reportable segments of $479 million, up 27 percent versus 2022; this included $5 million adverse currency impact
- Reported operating profit of $584 million, including $87 million of System Fund profit and an $18 million exceptional profit
- Net cash from operating activities of $315 million (2022: $175 million), with adjusted free cash flow of $277m (2022: $142m)
- Net debt increase of $419m since start of the year includes $372m share buybacks, $166m dividends and a $112 million net foreign exchange adverse impact
- Interim dividend 48.3¢, up 10 percent versus 2022; dividend payments in 2023 will return close to $250 million to IHG’s shareholders
- Trailing 12-month adjusted EBITDA of $996 million, up 23 percent versus 2022; net debt: adjusted EBITDA ratio of 2.3x
- Current $750 million buyback program 47 percent complete; share buybacks together with ordinary dividends are on track to return approximately $1.0 billion to shareholders in 2023
- New midscale conversion brand launching, with strong interest from owners already expressed
Elie Maalouf, CEO, IHG Hotels & Resorts, said, “I am honored to take over as IHG’s group CEO and excited to look ahead with our talented teams and owners all around the world to an important next chapter of growth. Our teams have delivered strong results in the first half, with financial performance, hotel openings, and signings all significantly above prior-year comparisons. Travel demand is very healthy, with RevPAR improving year-on-year across all our markets and exceeding 2019 pre-pandemic peaks for four consecutive quarters. In the Americas and EMEAA regions, leisure demand has remained buoyant, and business and group travel continued to strengthen, while in Greater China, demand has rebounded rapidly.
The investments we’re making in our powerful enterprise platform are delivering results for guests and owners—be it the breadth of attractive brands we now have in place, the excellent impact of our new mobile app, or the strength of our IHG One Rewards program, which has seen enrolments jump by +60 percent since launch a year ago. We opened 21 thousand rooms across 108 hotels in the half, keeping us on track for net system size growth expectations, and we signed over 34 thousand rooms across 239 hotels, +11 percent ahead of last year. More than a quarter of all signings were across our six Luxury & Lifestyle brands, as we accelerate growth in this higher fee income segment.
As we continue to grow our brand portfolio, we’re excited to announce we will soon launch a new brand targeted at midscale conversion opportunities. We’re proud of our industry-leading position in upper midscale with Holiday Inn and Holiday Inn Express. Our aim is that this new conversion brand will become the first choice for guests and owners in the midscale segment, accelerating our growth in a space that is already worth $14 billion in the U.S. market alone. Conversions represent a major growth opportunity for us, generating around 40 percent of first-half openings and signings globally, and we see an increasing desire from owners to quickly realize the benefits of IHG’s scale and strong enterprise. We’re delighted that more than 100 hotels have already expressed definitive interest in the new brand.
The combination of RevPAR and system growth drove further expansion of our fee margin, leading to a +27 percent increase in operating profit from reportable segments. Our +50 percent growth in adjusted EPS includes the additional earnings accretion from our ongoing return of surplus capital via share buybacks. The combination of these drivers demonstrates how IHG creates value for our shareholders, and as this industry continues to power forward, we are confident in the strengths of our business model, scale, and strategy to capture sustainable, profitable growth.”
