IHG Hotels & Resorts' fourth-quarter business travel revenue was driven by the Americas region, where rates again surpassed pre-pandemic levels and occupancy recovered to within 98 percent of 2019 levels, company executives said Tuesday during an earnings call. IHG executives said they were confident for 2023 corporate travel performance, citing no “indication that demand or pricing power is waning.”
“Despite some predictions, business travel is alive and well,” IHG CFO and group head of strategy Paul Edgecliffe-Johnson said.
IHG’s fourth-quarter results showed “sustained [average daily rate] above pre-Covid levels” and occupancy seeing a “near full recovery, which is in line with what we [forecast] since the start of the pandemic,” he added.
According to IHG, overall fourth-quarter demand was strong—particularly in the business transient sector, but also in group as travel restrictions continued to lift across the world.
“In 2022, we saw demand return strongly in most of our markets, pushing group [revenue per available room] back close to 2019 levels and fee margin ahead,” IHG CEO Keith Barr said.
“It’s particularly pleasing that in the second half of the year we exceeded 2019 levels for both [revenue per available room] and profitability," Barr added. "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.”
The company had “record rates” for full-year 2022 in the Americas with comparable RevPAR up 29 percent over 2021 and up 3.3 percent over 2019 levels following “headwinds from the omicron barriers in the first quarter,” according to IHG.
“RevPAR exceeded 2019 levels from April onwards, demonstrating sequential improvements in performance each quarter through the year,” Edgecliffe-Johnson said. In Q4, IHG’s RevPAR in the U.S. was up 13 percent against 2021 and up 8 percent over 2019, he added.
For full-year 2022, “business revenue increased 27 percent [over] 2021, exceeding 2019’s performance by 3 percent,” Edgecliffe-Johnson said.
As previously, announced Edgecliffe-Johnson next month will depart IHG to join gaming and booking company Flutter Entertainment as CFO and executive director.
Additional Q4 Results
IHG’s overall occupancy in the fourth quarter was up 5.6 percentage points year over year to 61.9 percent, which was down 5.1 percentage points from 2019 levels due to travel restrictions in Greater China and business changes in Russia, changes which also impacted revenue.
“When looking at 2022 versus 2019, two measures are closely aligned: RevPAR down 3 percent and fee business revenue down 5 percent,” Edgecliffe-Johnson said. “We achieved gross system growth of 5.6 percent to the addition of over 49,000 rooms. Our underlying removals rate was 1.3 percent. Our net system size growth was therefore 4.3 percent adjusting for the impact of ceasing operations in Russia,” he added.
During the fourth quarter, RevPAR reached $77.72, an increase of 25.3 percent from 2021 and 4.1 percent over 2019. ADR in the fourth quarter increased 13.9 percent over 2021 to $125.58, which was up 12.6 percent over 2019.
The company also reported “sustained pricing power” throughout the year and reported rate “improved by nearly 18 percent” resulting in “group RevPAR increasing by 37 percent.”
For the year, overall average daily rate strengthened to 8.2 percent ahead of 2019 and occupancy continued to recover to 7.4 percentage points below 2019 levels, according to IHG’s earning’s report. Systemwide 2022 occupancy was up 8.5 percentage points over 2021.
IHG reported full-year revenue of $1.8 billion in operating profit of $828 million which was an increase of 33 percent and 55 percent over 2021, respectively. The company’s total revenue is 12 percent below 2019.
As for IHG's pipeline, the company added more than 20,000 rooms across the Americas in 2022. With 4,000 rooms exiting the system in that time, IHG reported a removal rate “just north of 0.8 percent, which in the future would likely revert to the historic underlying average of around 1.5 percent underlying fee,” according to IHG executives.
This year, IHG signed “467 hotels in 2022 and opened 269, which led to net system growth of over 4 percent. The further 1,800 hotels in our pipeline represents future growth of over 30 percent of today’s system size,” Barr said.
“Looking at our future growth, we signed 32,000 rooms, taking our America's pipeline beyond 100,000 rooms,” Edgecliffe-Johnson added.
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