IHG Hotels & Resorts reported another strong year for top-line revenue growth in 2023 — not unlike its peers in the hotel industry — with earnings and profitability figures “all significantly ahead of last year,” executives said.
During a conference call to present the British firm’s full-year 2023 earnings results, CEO Elie Maalouf said IHG's hotel revenue per available room for the full year increased 16% over 2022.
“Despite tougher comparables as we progressed through the year, [fourth-quarter] RevPAR still finished up 8% year on year, and up 13% versus 2019,” he said. “Our fee margin continued to expand, growing by 3.4% points in the year … helping to drive operating profit to just over $1 billion, up 23% on 2022,” he said.
Chief Financial Officer Michael Glover said IHG's full-year 2023 revenue increased by 17% to $2.2 billion, and operating profit increased by 23% to $19 million.
“Revenue from the fee business increased by 17% to $1.7 billion, while operating profit from the fee business increased by 23% to $992 million, or by 25% on an underlying basis. Fee margin once again made considerable progress, improving by 340 basis points to 59.3%,” he said.
IHG also continues to grow its pipeline of hotels in development, Maalouf said. Year over year, IHG's development pipeline has grown 6% to approximately 300,000 hotel rooms. Conversions now account for more than 35% of the company's total signings and openings, he added.
Conversely, the number of new-build hotels increased by 12%, Glover said.
Glover added IHG is investing in its portfolio via capital expenditure and key money. He said gross CapEx for 2023 equaled $253 million, and key money equaled $101 million, an increase from $64 million in 2022.
“[That] is indicative of our increased development activity back to pre-COVID levels and also a mark of our growth in the luxury and lifestyle segment. Importantly, it is also a reflection of our discipline in only deploying funds where the returns justify the investment,” he said.
Repurchasing Shares
IHG's earnings per share increased 33% over the period, which Glover said is now “24% ahead of where earnings were back in 2019. 2023 saw another record year of cash generation, with free cash flow totaling $819 million.”
IHG has announced a third year of share buybacks, with an additional $800 million planned for full-year 2024. In 2023 IHG spent $750 million on buybacks, and in the last two quarters of 2022 acquired $500 million worth of stock buybacks.
“We are highly cash-generative, which supports our capital-allocation strategy. We returned a billion dollars to shareholders last year through ordinary dividends and share buybacks, and will exceed that total in 2024,” Maalouf said.
Global Demand Trends
The recovery of Chinese travel demand is a major source of IHG's optimistic outlook, Glover said.
“Trading in Greater China was bumpy in 2022, but in 2023 there was a sharp and sustained improvement and full recovery in RevPAR, with the year as a whole up 1% versus 2019. Third-quarter RevPAR was particularly strong, up 9% versus 2019, driven by a better-than-anticipated uptick in domestic leisure trips,” he said.
China's Lunar New Year holiday just finished on Feb. 17, and according to the Chinese government's tourism figures, there were 474 million domestic trips over the eight-day holiday week and tourism spend totaled 632.7 billion Chinese yuan ($88 billion), a 47% increase above 2022.
IHG's hotel occupancy across the Americas region throughout 2023 was up 1.5%, average daily rate up 4.6% and RevPAR up 7%.
In Europe, full-year hotel occupancy increased 7.9%, ADR increased 9.8% and RevPAR increased 23.7%.
Glover said there were signs business travel is recovering, too. Despite that segment still lagging 2019 numbers by 5%, they outpaced 2019 numbers by 1% in the fourth quarter of 2023.
On Jan. 17, IHG announced Leanne Harwood as its new senior vice president and managing director, luxury and lifestyle, Americas. The industry veteran formerly held the position as senior vice president and managing director, Japan, Australasia and Pacific.
As of press time, IHG stock was trading at £82.50 ($104.27) a share, an increase of 45.65% year over year. The London Stock Exchange’s FTSE 100 index was down 3.52% over the same period.