IHG reported its Q3 2024 trading update. Highlights include:
- Q3 global RevPAR up 1.5 percent, with Americas up 1.7 percent, EMEAA up 4.9 percent, and Greater China down 10.3 percent
- Q3 global rooms revenue on a comparable hotels basis saw group demand up 6 percent, business up 2 percent, and leisure broadly flat on the same quarter last year
- Year to date (YTD) global RevPAR up 2.4 percent, with Americas up 1.8 percent, EMEAA up 6.4 percent, and Greater China down 5.6 percent
- Average daily rate up 1.7 percent and occupancy down 0.1 percentage point in Q3, up 1.9 percent and up 0.4 percentage points respectively YTD
- Gross system size growth up 5.9 percent year-over-year (YOY), up 3.7 percent YTD; opened 17,500 rooms (98 hotels) in Q3, representing another quarter of sequential improvement and ahead of the 7,700 in the same period last year
- Net system size growth up 4.1 percent YOY, up 2.3 percent YTD; global system of 968,000 rooms (6,505 hotels)
- Signed 19,200 rooms (129 hotels) in Q3, up 14 percent YOY; global pipeline of 327,000 rooms (2,218 hotels), up 12 percent YOY
- $614 million of 2024’s $800 million share buyback program completed to date, reducing the share count by 3.7 percent
- On track to return over $1 billion to shareholders in 2024 through dividend payments and share buybacks
- Expect to finish 2024 in line with market expectations and our growth algorithm
Elie Maalouf, Chief Executive Officer, IHG Hotels & Resorts, said, “We are pleased with the latest trading performance and another strong period of development activity, and we are on track to finish 2024 in line with market expectations. RevPAR grew 1.5 percent in the third quarter of 2024, reflecting the strength of our globally diverse footprint, healthy business demand, and a record period for group bookings. Our EMEAA region again performed strongly, up 4.9 percent, and the Americas increased by 1.7 percent, driven by continued growth in the United States. In Greater China, RevPAR was down 10.3 percent as we came up against strong comparatives of resurgent domestic travel this time last year, and the quarter was still broadly in line with 2019 levels.
Our development performance was particularly notable. We opened 17,500 rooms across 98 hotels, well over double the same period last year, which was in part due to the next 6,200 rooms of the NOVUM Hospitality agreement joining IHG’s system. A strong signing performance of 19,200 rooms across 129 properties was up 14 percent more than 2023, and led to a 12 percent year-on-year increase in our pipeline. ‘Quicker to market’ conversions represented over 50% percent of openings and 40 percent of Q3 signings, a clear reflection of the strength and appeal of our brands and wider enterprise to owners, and we’ve also seen the advance in new-build signings over the course of the year as developer confidence continued to improve. In fact, in Greater China, reflecting the attractive long-term demand drivers, our excellent development momentum should lead to 2024 being one of the biggest-ever years for both hotel openings and signings in this region.
We have made great progress this year to further strengthen IHG’s enterprise platform, grow our brands, and deliver on our growth algorithm. The power of this algorithm comes from the compounding nature of growing fee revenues through the combination of RevPAR, system expansion, and ancillary fee streams, which in turn helps to increase margins and, with our strong cash generation, allows us to reinvest in our business and return surplus capital to shareholders. We remain confident in our abilities to capitalize further on our scale, leading positions, and the attractive, long-term demand drivers for our markets.”
Regional Performance
Americas
Trading momentum was sustained and broad-based across demand drivers. Q3 RevPAR was up 1.7 percent, with the United States up 1.2 percent and growth up 6.2 percent in aggregate across Canada, Latin America, and the Caribbean. Occupancy for the region was unchanged at 72.3 percent, and rate was up 1.7 percent. On a comparable hotels basis, Q3 rooms revenue for leisure was 1 percent lower than 2023 levels, business was up 3 percent, and group was up 7 percent.
Gross system growth was up 2.8 percent YOY and up 2.0 percent YTD, with 3,500 rooms (24 hotels) opened in the quarter. Net system size growth was up 1.1 percent YOY and up 0.6 percent YTD. A further 6,700 rooms (59 hotels) were added to the pipeline in the quarter, including 19 hotels signed across the Holiday Inn brand family, 17 across extended-stay brands, and 7 across Luxury & Lifestyle; there were also seven further signings for Garner.
EMEAA
The company saw a period of demand for the region as a whole. Q3 RevPAR was up 4.9 percent, with occupancy up 0.9 percentage points to 74.6 percent and rate up 3.6 percent. By major geographic markets within the region, RevPAR ranged from up 7.1 percent in Continental Europe, 6.5 percent in East Asia and Pacific, and 2.2 percent in the United Kingdom, though RevPAR was down 3.2 percent lower in the Middle East.
Gross system growth was up 8.2 percent YOY and 5.3 percent YTD, with 8,600 rooms (47 hotels) opened in the quarter. Openings included 6,200 rooms from a further 31 conversions as part of the NOVUM Hospitality agreement, taking the total converted to date to 7,300 rooms and 37 hotels. Net system size growth was up 6.6 percent YOY and up 3.9 percent YTD. There were 5,800 rooms (30 hotels) added to the pipeline. Conversions represented 56 percent of all room signings and included two further Garner properties as it continued to be developed in the region. There were also eith signings for the Vignette Collection, as its rollout further accelerates.
Greater China
This latest short-term trading performance reflects the unusually strong comparatives a year ago, and the company remains encouraged by the longer-term demand drivers for the region. Q3 RevPAR was down 10.3 percent YOY against comparatives that included resurgent domestic travel this time last year, which saw RevPAR for Q3 2023 exceed 2019 levels by 9.3 percent. There were also adverse impacts from shifts in the timing of public holidays and the typhoons in September.
Occupancy was down 2.1 percentage points to 64.9 percent, and rate was down 7.4 percent YOY. Tier 1 cities saw RevPAR down 6.1 percent YOY. Tier 2-4 cities were down 12.2 percent YOY due to the particularly strong comparatives from domestic leisure demand this time last year into Tier 4 resort locations. In contrast in 2024, there has been an expansion of outbound leisure travel, most notably to elsewhere in East Asia and Pacific, as seen benefiting demand in the EMEAA region.
Gross system growth was up 11.9 percent YOY and 6.8 percent YTD, with 5,500 rooms (27 hotels) opened in the quarter, which is 51 percent more than the same quarter last year and 50 percent ahead year-to-date. Net system size growth was up 9.6 percent YOY and 5.0 percent YTD. A further 6,700 rooms (40 hotels) were added to the pipeline as development activity continues to gain momentum following the extended period of COVID-related restrictions, with cumulative signings to date in 2024 up by over 20 percent on last year.
Share Buyback Progress
As announced in February, a $800 million share buyback program is returning surplus capital to shareholders in 2024. This follows the $750 million program in 2023 and the $500 million program announced in 2022, which already reduced the total number of voting rights in the company by 6.1 percent and 5.0 percent, respectively. The 2024 program is 77 percent complete, with $614 million (£482 million) having been cumulatively spent to date, repurchasing 6.1 million shares. The 2024 program to date has therefore reduced the total number of voting rights in the company by a further 3.7 percent to 159.2 million as at market close on Monday October 21, 2024.
The $800 million share buyback program together with approximately $255 million of ordinary dividend payments will have returned a total of $1,055 million to shareholders in 2024. This is equivalent to 7.1 percent of IHG’s $14.9 billion (£11.7 billion) market capitalization at the start of 2024, and 6.0 percent of IHG’s most recent $17.7 billion (£13.6 billion) market capitalization.
Financing Update
In September 2024, the group issued a €750 million bond at a coupon of 3.625 percent, repayable in September 2031. Currency swaps were transacted at the same time as issuance in order to convert the proceeds and interest flows to USD. This fixed the bond debt at $834 million, with interest payable semi-annually of 4.903 percent.
In October 2024, a €500 million bond matured, with future maturities in August 2025 (£300 million), August 2026 (£350 million), May 2027 (€500 million), October 2028 (£400 million), November 2029 (€600 million), and September 2031 (€750 million). After currency swaps, the group now has a total of $3,482 million in bonds outstanding, with a blended borrowing cost of approximately 4.1 percent.
As set out at the time of IHG’s half-year results in August 2024, after completing this year’s buyback program to return $800 million of surplus capital to shareholders and based on analyst consensus, leverage continues to be expected around the lower end of net debt: adjusted EBITDA target range of 2.5-3.0x at 31 December 2024.
InterContinental Alliance Resorts—The Venetian Resort Las Vegas
IHG’s license agreement to affiliate The Venetian Resort Las Vegas and The Palazzo at The Venetian Resort with the InterContinental Hotels & Resorts brand will come to an end on January 1, 2025, after 15 years. Although the end of this agreement will remove 7,092 rooms or approximately 0.7 percent from IHG’s overall system size in 2025, the nature of the fee structure under this particular licensing agreement means it contributed less than $1 million or 0.1 percent of IHG’s revenue from fee business in 2023 and a net nil contribution to operating profit from reportable segments. The impact on the System Fund is also immaterial. Agreements for the three other InterContinental Alliance Resorts are unchanged.
