InterContinental Hotels Group (IHG), the hospitality giant comprising Holiday Inn and 18 other global brands, has reported encouraging Q3 results, propelled by a resurgence in domestic travel in China. As per its Q3 trading update on Friday, the company observed near pre-pandemic summer demand levels, with a year-on-year revenue per available room (RevPAR) growth of 10% and a 13% increase compared to 2019 figures. This marks five consecutive quarters of improvement for IHG, aligning with the InvestingPro data that shows a revenue growth of 24.45% and a quarterly revenue growth of 27.69%.
The recovery in Greater China outpaced other regions, with its RevPAR now surpassing 2019 levels. The group's occupancy rate was at 72%, almost mirroring pre-Covid demand levels. The company's RevPAR across its 171,000 rooms in Greater China exceeded 2019 levels every month of the quarter, marking a 9.3% increase.
Despite weak performance during Q1 and Q2, IHG CEO Elie Maalouf noted sequential growth in China signings and openings each quarter, exceeding 2022 levels. CFO Michael Glover confirmed significant trading improvements in China, with growth at 9.3% ahead of 2019. This is in line with the InvestingPro Tips that highlight IHG's high earnings quality and the company's consistent increase in earnings per share.
Amidst these positive trends, IHG expanded its global footprint and development pipeline by inaugurating around 8,000 rooms across 50 hotels and incorporating an additional 17,000 rooms from 123 properties into its ongoing projects. However, IHG may face a development slowdown due to short-term financing challenges. This aligns with the InvestingPro tip that IHG operates with a moderate level of debt.
The company increased its room count by 4.7% year-on-year to 929,987 rooms and returned $1 billion to shareholders via share buyback programs. This is equivalent to over 8% of IHG’s recent $12.4 billion market cap. According to InvestingPro, the company's market cap is currently at $11.9B.
IHG's shift towards luxury and lifestyle brands such as Six Senses, Regent, InterContinental, Vignette, Kimpton, and Hotel Indigo could slow development. These brands account for 800 of IHG's over 6,000 hotels. Senior VP Jane Mackie emphasized how focusing on luxury and lifestyle unlocks revenue benefits like branching into spas and wellness or residential sectors.
Looking forward, Maalouf expects a strong financial performance to close out in 2023 as IHG continues providing industry-leading advantages for guests and hotel owners across their brand portfolio and loyalty program. The company's P/E ratio stands at 20.5, and analysts predict the company will be profitable this year, according to InvestingPro Tips. The company's next earnings date is set for October 20, 2023. For more detailed insights and tips, readers can explore the InvestingPro product.
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