InterContinental Hotels Group during its first-quarter earnings call Friday pointed to strong leisure trends and a brightening business travel environment supporting continued global pricing power for 2022.
“We’ve seen very positive trading conditions in the first quarter with travel demand continuing to increase in almost all of our key markets around the world," said CEO Keith Barr in a statement released prior to the call. "The high level of demand we have seen for leisure travel continues to drive increased rates and occupancy. We also continue to see a return of business and group travel, further supporting [revenue per available room] improvements in many of our key urban markets. As occupancy levels rise and due to the strength of our brands, our hotels are seeing increased pricing power."
Despite headwinds in the quarter that included January's omicron outbreaks in Europe and the United States, as well as lockdowns in China that doused expectations in that region, first-quarter companywide average daily rate trailed 2019 by just half a percentage point. Systemwide occupancy increased 11.1 percentage points over 2021, making up half the recovery distance to 2019 levels. Revenue per available room showed a 60.8 percent improvement over the first quarter of 2021, but trailed 2019 by 17.7 percent.
Barr's statement underscored growing market strength in the U.S., which outperformed the Europe, Middle East, Africa and Asia market as well as Greater China, which the company reports separately from the rest of Asia.
Speaking specifically about rate, he said, "In March, our hotels in the U.S. achieved leisure rates up by more than 10 percent on 2019 levels, and rate across the whole of the U.S. business was 4 percent ahead."
CFO and group head of strategy Paul Edgecliffe-Johnson added more detail to that picture, noting "very encouraging improvement" in meetings and events bookings and performance in the U.S. market exerting more upward pressure on rates even after strong leisure demand has done much of the heavy lifting. "This gives continued reassurance on pricing power," he said.
Q1 Highlights
IHG's first-quarter bright spots were Europe and the U.S., and the company expects that to continue. "It's building up to what I think will be a good second quarter, very strong summer of demand with good pricing. And with what we've got on the books, in relatively short booking windows, [is] very encouraging," said Edgecliffe-Johnson.
While the Europe, Middle East, Asia and Africa region showed the most RevPAR improvement in the first quarter at 122 percent year over year, a 33.1 percent gap remains to reach 2019 RevPAR performance in the region.
Omicron outbreaks followed by lockdown policies in China drove a 7.4 decline from first quarter 2021 and 41.8 percent decrease from first quarter 2019.
IHG signed 17,000 rooms into its development pipeline in the first quarter, 15 percent more than in 2021. The total room pipeline increased 2.4 percent to 278,000.
Of the 120 hotels signed, luxury and lifestyle brands account for around 20 percent, and 63.8 percent are in Americas. Brands Holiday Inn and Crowne Plaza together are up 22 percent over first quarter 2021, with 52 and 14 signings, respectively.
The net system size, adjusted for the removals of 2,107 Holiday Inn and Crowne Plazas in 2021, expanded 3.4 percent.