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Evening Standard
Evening Standard
Business
Daniel O'Boyle

‘Still more recovery to come in London’ for IHG, despite revenue above pre-pandemic levels

InterContinental Hotels Group (IHG) shares dipped this morning despite a $750 million buyback, as trading returned to pre-pandemic levels in London but CFO Paul Edgecliffe-Johnson said there was still more recovery to come in the capital.

The business rebounded from the pandemic with $1.83 billion in revenue, though this was towards the lower end of analysts’ expectations. Of this total, $1.45 billion came from its fee business, made up of franchised hotels from its brands such as Holiday Inn, Kimpton and the InterContinental.

Revenue from the UK for the full year was 1% above pre-pandemic levels, with London revenues in the fourth quarter of the year 6% above Q4 of 2019.

Edgecliffe-Johnson, though, noted that London was still lagging behind the rest of the UK, mostly due to the slower return of travel from Asia.

“The areas outside of London actually performed even stronger,” he said. “So there’s still more recovery to come in London.

“So it was a good performance but there’s still Chinese travellers to come to the UK and that will drive demand.”

The group also reported a 25% revenue increase in the Middle East, which it put down to the World Cup.

Earnings per share almost doubled to $2.82.

Besides the $750 million buyback programme, IHG also increased its year-end dividend by 10% to 94.8 cents per share. This is on top of a 43.9 cent dividend paid in October.

Edgecliffe-Johnson noted that returning cash had come to be expected by shareholders.

“The first thing we always try to do is invest in the business and we see if there’s any growth opportunities that we can invest in,” he said. “But the nature of our business is that we have a lot of cash every year.

“I think that our strategy for uses of cash is very well-understood by shareholders,” he said. “There are not many companies that can continue to grow the topline and also make a lot of cash.”

In total, these dividend payments are worth just under $250 million.

The group now counts 911,927 rooms in its portfolio, up by 3.6% from this time last year, with a further 80,388 in the pipeline.

CEO Keith Barr said he expects demand to be high in 2023.

“Looking to 2023, while there are economic uncertainties, we expect continued strong leisure demand in many markets, alongside further return of business and group travel and the ongoing reopening of China,” Barr said.

IHG noted that the hotel sector - and especially business travel and the “upper midscale” slice of the market - has typically demonstrated “relative resiliency” during economic downturns.

Julie Traynor, partner at Begbies Traynor, said IHG’s confidence in the future seemed warranted.

“There’s confidence despite an uncertain global economic outlook this morning. InterContinental says travel is low down the list of things cash-strapped consumers cut, and business travel is steadily returning, with hybrid working arrangements delivering a further boost,” she said.

“With almost a million rooms across 6,000 hotels either directly owned or franchised under InterContinental’s various brands, and plans to add a further 1,800 properties, management are betting big on this recovery continuing.”

“But they are confident enough in the future to increase the dividend and launch a $750 million share buyback. As long an travellers remain confident to check in, then InterContinental’s strategy checks out.”

Shares were down a little over 1% this morning to 5,532p.

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