IHG Q3 2023 Results: Chinese Recovery Has Arrived, Says CEO

20.10.2023 - 10:37 / skift.com / Ihg / Elie Maalouf / Josh Corder

IHG’s third-quarter results on Friday show the group is starting to benefit from the domestic travel resurgence in China, seeing improvements over 2019 for the first time in four years.

RevPAR across the UK operator’s 171,000 rooms in Greater China pulled ahead of 2019 levels every month of the quarter. RevPAR increased 9.3% in the area, but year-to-date, Greater China results are dragged down by a weak in the first and second quarter, with RevPAR down 0.8% YTD and room rates down half a percent.

Within China, record numbers of locals are opting to do their holidays within the country, a shift that has upset external tour operators waiting for deep-pocketed groups to fly in. For IHG and other operators in the country, it has meant numbers are finally improving.

In the call, CEO Elie Maalouf said: “China signings and openings have been growing sequentially every quarter and well above 2022, in the direction of [above 2019]. It’s not a hope, it’s a reality we’re seeing.”

“Greater China continued its excellent rebound,” said Maalouf in the earning release, adding that occupancies have seen a “near-complete return to pre-Covid levels of demand,” group-wide, and “pricing remained very robust” across the board.

CFO Michael Glover said in the earnings call: “In China, trading has significantly improved. Growth is 9.3% [ahead of 2019]. There was particularly strong domestic leisure demand, which was reflected in July, our strongest month in July. This is also why RevPAR is up in the tier two and three cities.”

“The start of October is also an important leisure period in China. Aligned with this, IHG saw RevPAR strongly ahead of 2019 in the eight-day holiday period.“

Maalouf later said in the call that China is now one of their greatest prospects for the future, not just for recovery, but growth. He said: “There’s a lot of energy (in China), a lot of dynamism. We believe China is a tailwind for us.”

Across all regions, group RevPAR was up 12.8% above 2019 and 10.5% above 2022.

Tucked elsewhere in the third quarter earnings today, IHG said it may see some development slowdown in the immediate future. Year-over-year the company has increased its room count by 4.7%, swelling to 929,987 rooms, but “some short-term financing challenges [are] holding back new hotel development,” said Maalouf.

In February, IHG announced a $750 million share buyback program to return surplus capital to shareholders, following a $500 million buyback program the year before. Up to the third quarter, IHG has returned $1 billion to shareholders. Equivalent to 10% of IHG’s $10 billion (£8.3 billion) market capitalization at the start of the year, and more than 8% of IHG’s most recent $12.4 billion (£10.2 billion) market cap.

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