- Revenue per room grows double digits
- 2023 buyback almost complete
- Another buyback likely next year
Hotel and resorts firm Intercontinental Hotels (IHG) posted a solid third-quarter trading update and confirmed its full-year forecasts after revenues topped forecasts.
However, after a strong run since July and amid continuing unrest in the Middle East, the shares gave up 3% to £59.70 sending them towards the bottom of the FTSE 100 leader board.
BETTER THAN EXPECTED
Group RevPAR (revenue per available room) for the three months to 30 September rose 10.5%, below the first half’s 24% increase but comfortably ahead of the consensus forecast of a 9% rise.
Compared with the same period of 2019, RevPar was almost 13% higher with double-digit growth all three of the group’s regions while occupancy was 72%, or just 1% behind 2019, confirming demand is almost back to pre-pandemic levels.
‘Travel demand remained very healthy during the quarter’, commented chief executive Elie Maalouf. ‘Pricing remained very robust. As well as year‑on‑year RevPAR growth in each of our three regions, it was also pleasing to see rooms revenue growth for each of leisure, business and group travel.’
RevPar was 4.1% higher year-on-year in the Americas, 15.9% higher in EMEA (Europe, Middle East and Africa) and 43.2% higher in Greater China, while across the group both average daily rates and occupancy were 4.1% higher.
The firm opened nearly 8,000 rooms across 50 hotels during the quarter and added 17,000 rooms to its pipeline across 123 properties, underlining its expansion plans.
‘We expect to close-out 2023 with very strong financial performance’, said Maalouf. ‘Looking further ahead, whilst there are macro-economic uncertainties and some short-term financing challenges holding back new hotel development, I am excited about the future for IHG and the attractive, long-term demand drivers for our markets.’
MORE BUYBACKS TO COME
Having bought back $500 million of shares in 2022, the group has almost completed this year’s $750 million repurchase programme with over 10 million shares or 5.7% of the outstanding capital bought at an average price of £55.76.
Together with ordinary dividends, IHG will have returned $1 billion to shareholders by the end of this year equivalent to 10% of its market cap at the start of 2023.
While the firm didn’t give a figure for future buybacks, it said the highly cash-generative nature of the business model ‘means we expect to have significant ongoing capacity to return further surplus capital to shareholders, both in the ordinary course and as we look to move leverage into our target range over time’, and it would decide the amount and timing of future capital returns early next year.
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