Taavel giant IHG announced a $500 million share repurchase after its half-year profit more than quadrupled, supported by rising room pricing, strong leisure travel demand, and a resurgence in corporate stays, particularly in the United States.
Hotel operators benefit when people travel more and stay longer in hotels, raising occupancy rates and pricing, yet they face dangers from chronic inflation and cost-of-living difficulties around the world.
Analysts were concerned about the number of hotel rooms added in the first half and said the group’s performance paled in comparison to U.S. counterparts Marriott and Hilton, thus IHG’s shares fell 1.2 per cent to 4,953 pence.
“Hilton and Marriott both beat by double digits in Q2 and had total EBITDA ahead of 2019 so this (IHG results) should be taken as slightly disappointing, especially with no FY guidance to give comfort,” Berstein analysts said in a note. EBITDA is earnings before interest, tax, depreciation and amortisation.
IHG, the parent company of Crowne Plaza, Regent, and Hualuxe, announced that profitability in the Americas, its largest market, had surpassed pre-pandemic levels, owing primarily to domestic leisure demand.
The Americas’ second-quarter revenue per available room (RevPAR), a key indicator of profitability, was 3.5 per cent higher than in 2019. IHG’s net room growth in the first half of the year was 3 per cent, hampered in part by the company’s exit from Russia. Analysts anticipate a 4% increase in net system size for the entire year.
“Whilst the economic outlook faces uncertainties as central banks and governments take action to manage inflation, we remain confident in our business model,” IHG chief executive officer Keith Barr said in a statement.
Operating profit for the six-month period ended June 30 increased to $361 million, up from $138 million the previous year.
The company, which has already begun final dividend payments, reinstated its interim dividend at 43.9 cents per share, a 10% increase over the previous year.
(Adapted from Reuters.com)