IHG CEO: No Slowdown Fears, No Weakness Outside China

06.08.2024 - 19:19 / skift.com / Sean Oneill

InterContinental Hotels Group (IHG) reported earnings Tuesday, and said it isn’t seeing signs of demand weakness outside of China.

“We’re watching the data that’s coming out on the U.S. economy, but we’re not seeing anything in our numbers right now,” said CEO Elie Maalouf. “In Q2, we saw an acceleration. Looking into July, we saw a broad continuation of that pattern. Even early into August, it seems to be the same.”

Marriott and Wyndham recently suggested consumers may be pulling back on travel demand in the second half, and they modestly lowered their full-year outlooks.

But IHG, the third-largest Western hotel group by room count, said the post-pandemic tourism wave was merely moderating and normalizing to pre-pandemic levels. The group’s outlook remains cautiously optimistic, thanks partly to performance gains from its technology investments.

A key measure of hotel demand is revenue per available room, and IHG reported a 3% rise in this figure worldwide in the first half of the year. Revenue per available room rose 2.5% in the U.K., 4.8% in the rest of Europe, and 9.2% in the Middle East.

IHG saw revenue per available room fall by 2.6% in China. But the group didn’t see a dramatic impact from that on its overall performance.

That news contrasted with Marriott, which cited weakness in China as a factor for lowering its outlook for the year.

In an interview with Skift, IHG’s Maalouf cited three factors affecting the group’s China performance:

“There’s been strong outbound China travel mostly to Asia Pacific, including Japan, Thailand, Vietnam, South Korea, and Singapore,” Maalouf said. “Our Asia Pacific business was up 15%.”

Given that IHG is the largest international hotel operator in the country, one might expect it would be more exposed than its rivals to any decline in domestic travel demand in China. After all, it derives more fees as a proportion of revenues than its rivals in China because it relies on direct franchising.

However, Maalouf argued that when the Chinese travel elsewhere, they often stay in IHG hotels. That’s partly why weakness in China hasn’t hurt the overall bottom line more.

“We’re not saying that it’s a one-for-one, like-for-like transfer, but we’re saying that is definitely part of the explanation,” Maalouf said.

“I would think the proportional drop [in fees] for somebody who’s master franchised or is in a joint venture is going to be the same or worse, not better, than IHG,” Maalouf said. “They’re going to make even less proportionately, assuming everything else is equal.”

“We may be impacted more from an absolute sense [by a domestic China slowdown] because we have a bigger business there,” Maalouf told Skift. “I’m quite happy with that. Having the biggest international