IHG to launch new midscale brand; reports H1 results

During Intercontinental Hotels Group‘s (IHG) first-half results presentation, Elie Maalouf, CEO, IHG Hotels & Resorts, revealed that the company will soon launch a new brand targeted at midscale conversion opportunities.

For the first half of the year, ended June 30, IHG reported a 24% year-over-year RevPAR increase. Q2 RevPAR was up 9.9% compared to the same period of 2019.

“I am honored to take over as IHG’s group CEO and excited to look ahead with our talented teams and owners all around the world to an important next chapter of growth,” said Maalouf. “Our teams have delivered strong results in the first half, with financial performance, hotel openings and signings all significantly above prior year comparisons. Travel demand is very healthy, with RevPAR improving year-on-year across all our markets and exceeding 2019 pre-pandemic peaks for four consecutive quarters. In the Americas and EMEAA regions, leisure demand has remained buoyant and business and group travel continued to strengthen, while in Greater China, demand has rebounded rapidly.”

He continued, “As we continue to grow our brand portfolio, we’re excited to announce we will soon launch a new brand targeted at midscale conversion opportunities. We’re proud of our industry-leading position in upper-midscale with Holiday Inn and Holiday Inn Express. Our aim is that this new conversion brand will become the first choice for guests and owners in the midscale segment, accelerating our growth in a space that is already worth $14 billion in the U.S. market alone. Conversions represent a major growth opportunity for us, generating around 40% of first-half openings and signings globally, and we see an increasing desire from owners to quickly realize the benefits of IHG’s scale and strong enterprise. We’re delighted that more than 100 hotels have already expressed definitive interest in the new brand.”

H1 highlights include:

  • Americas H1 RevPAR up +11% YOY, EMEAA +42% and Greater China +94%, reflecting the differing levels of travel restrictions that were still in place in H1 2022
  • ADR up +7% vs. 2022, +11% vs 2019; occupancy up +9% pts vs 2022, just 1.3% pts lower vs. 2019
  • Gross system growth +6.3% YOY; net system size growth of +4.8% YOY
  • Opened 21,000 rooms (108 hotels) in H1, +40% more than H1 2022; global estate now at 925,000 rooms (6,227 hotels)
  • Signed 34,200 rooms (239 hotels) in H1, +11% more than H1 2022; global pipeline now at 286k rooms (1,931 hotels), +2.9% YOY; 17.7k rooms (131 hotels) in Q2, +7% ahead of Q1 and +25% more than Q2 2022
  • Fee margin of 58.8%, up +3.3% pts vs 2022 on trading recovery in EMEAA and Greater China
  • Operating profit from reportable segments of $479 million, +27% vs 2022; this included $5 million adverse currency impact
  • Reported operating profit of $584 million, including $87 million of System Fund profit and an $18 million exceptional profit
  • Net cash from operating activities of $315 million (2022: $175 million), with adjusted free cash flow of $277 million (2022: $142 million)
  • Net debt increase of $419 million since start of the year includes $372 million share buybacks, $166 million dividends and a $112 million net foreign exchange adverse impact
  • Trailing 12-month adjusted EBITDA of $996 million, +23% vs 2022; net debt: adjusted EBITDA ratio of 2.3x

“The investments we’re making in our powerful enterprise platform are delivering results for guests and owners—be it the breadth of attractive brands we now have in place, the excellent impact of our new mobile app or the strength of our IHG One Rewards program, which has seen enrolments jump by +60% since launch a year ago,” added Maalouf. “We opened 21,000 rooms across 108 hotels in the half, keeping us on track for net system size growth expectations, and we signed more than 34,000 rooms across 239 hotels, +11% ahead of last year. More than a quarter of all signings were across our six Luxury & Lifestyle brands, as we accelerate growth in this higher fee income segment.”

He continued, “The combination of RevPAR and system growth drove further expansion of our fee margin, leading to a +27% increase in operating profit from reportable segments. Our +50% growth in adjusted EPS includes the additional earnings accretion from our ongoing return of surplus capital via share buybacks. The combination of these drivers demonstrates how IHG creates value for our shareholders, and as this industry continues to power forward, we are confident in the strengths of our business model, scale and strategy to capture sustainable, profitable growth.”

Brand highlights

Luxury & Lifestyle
IHG is successfully driving growth and market share in the higher fee per key Luxury & Lifestyle segment. Its six brands in this category have grown to represent 13% of IHG’s system size (479 properties, 123,000 rooms) and 21% of the pipeline (336 properties, 61,000 rooms), around twice the size from five years earlier. Luxury & Lifestyle accounted for 26% of signings in the half (15% for Americas, 53% for EMEAA and 16% for Greater China). IHG has grown to 215 properties across more than 60 countries, with a pipeline of 93 more that is equivalent to 33% of the current system size. Six Senses now has 23 properties open, and eight signings in the half grew its pipeline to 39; Regent has nine properties open, including most recently the Carlton Cannes, with two signings in the period for further flagship properties in the U.S. and Saudi Arabia taking its pipeline to 11; Kimpton signed a further nine properties, including its first in Saudi Arabia, and its pipeline is now approaching 50 properties, on top of the 75 currently open. IHG continues to accelerate the expansion of Hotel Indigo, with 15 signings in the period, including five new countries for the brand; with 145 hotels open, its pipeline is set to double the existing system size. Vignette Collection, the Luxury & Lifestyle conversion brand, signed and opened its first hotel in the U.S., and now has 25 open and pipeline properties globally.

Within the company’s Premium category, the combined open and pipeline hotels now stands at 733 (43 Hualuxe, 55 EVEN, 110 voco and 525 Crowne Plaza properties). This category represents 15% of IHG’s current system and 18% of its pipeline. Of particular note in the period were two openings for EVEN in Greater China as it builds its presence in that market, while the latest signings in the U.S. reflect the new formats of in-room fitness equipment. The voco brand continues to rapidly build, with seven openings and 16 signings in the period, including a first resort signing in the Middle East & Africa region. Crowne Plaza saw another strong period with 18 signings, with its pipeline representing growth of almost 30% of its current system size.

IHG’s Essentials category includes the Holiday Inn Express and the Holiday Inn Hotels & Resorts brands. Holiday Inn Express extended its scale with the opening of 38 hotels and another 77 signed; now reaching over 3,100 hotels open and a pipeline for a further 640, representing future system growth of 24%. Holiday Inn opened seven hotels in the period and signed 19, with its pipeline equivalent to 20% of its current system size; recent openings such as Holiday Inn Riyadh The Business District showcase the latest design hallmarks and the brand’s Open Lobby concept. The avid hotels brand has reached 61 open properties; with a pipeline of 146. This will more than triple today’s existing system size and further demonstrate the strong guest and owner proposition for this new-build midscale brand.

In the Suites category, Candlewood Suites and Staybridge Suites opened 12 properties and signed 34 more; with nearly 700 open hotels and another 300 in their pipelines, their growth outlook remains very strong. The newest brand, Atwell Suites, already has two properties open and signed eight more in the half to take its pipeline to 35. The Holiday Inn Club Vacations timeshare company signed a conversion portfolio of four beachfront resorts in Cancun, Mexico, to expand on its current 28 and marks the brand’s first properties outside of the U.S.

Exclusive partners
The recent addition of the exclusive Partners category further demonstrates the strengths and attractiveness of IHG’s enterprise platform, particularly in regard to providing brands and hotels with access to our advanced technology and our distribution channels, according to the company. The integration of Iberostar Beachfront Resorts as an Exclusive Partner brand is progressing well. A further 10 properties were added to IHG’s system in the first half of 2023, taking the total to date to 43. Of the up to 70 existing hotels, the remaining 27 require additional approvals from third parties in order to join IHG, which are targeted to occur over the course of the balance of this year and next.