InterContinental Hotels Group, the owner of Crowne Plaza and Holiday Inn, is launching a $500 million (€490m) share buyback and increasing its interim dividend to reward shareholders as leisure and business travel demand recovers to near pre-pandemic levels.
The group, which owns 17 brands and has more than 6,000 hotels in its portfolio, said on Tuesday that revenue per available room (revpar), the industry’s chosen metric, was down just 10.5 per cent in the six months to June 30th compared with the same period in 2019.
“The Americas is strong into the recovery, Europe is entering into the recovery very aggressively over summer, and now borders in Asia are opening up and China will come too, which gives us confidence that we’ll see an extended recovery,” said Keith Barr, IHG’s chief executive.
Revpar in the Americas region, where more than two-thirds of IHG’s hotels are located, was up 3.5 per in the three months to June 30th compared with 2019 levels. The group also posted operating profits in the Americas of $351 million in the six months to June 30th, up 2.6 per cent on the comparable period in 2019.
Mr Barr said the company’s decision to issue an interim dividend of 43.9 cent per share, 10 per cent higher than the 2019 payment, along with announcing the share buyback, was part of IHG’s “long track record of returning surplus cash to shareholders”.
He added that the recovery in business travel was particularly strong, defying predictions during the pandemic that the trend towards remote working would spell an end to work trips. In June this year business travel demand in the US was only 1 per cent down on June 2019, according to Mr Barr.
“After two years of people not going seeing clients [and] not having team meetings, we’re seeing business travel pick up,” he said.
Globally IHG reported revenues of $822 million in the first half of the year, down 17 per cent on the comparable period in 2019. It also posted operating profit of $377 million, down 8 per cent on the $410 million profit booked in the first half of 2019.
Despite concerns over inflationary cost pressures and a consumer downturn hurting the recovery, Mr Barr said: “We remain confident in our business model and the attractive industry fundamentals that will drive long-term sustainable growth.”
Group-wide cost inflation came to 4 per cent so far this year, in large part because IHG runs a franchised model, operating and leasing fewer than 1 per cent of its hotels.
But Jamie Rollo, an analyst at Morgan Stanley, pointed out in a note that the company’s “weak net unit growth, the recent slowdown in corporate booking... and the likelihood revpar weakens as we exit the leisure-dominated summer period” could hurt the company’s outlook.
IHG shares were down 1.5 per cent to £49.40 in mid-morning trading. – Copyright The Financial Times Limited 2022