IHG profits exceeded $1 billion for first time

“Everywhere I go, I see opportunity,” said Elie Maalouf, CEO, InterContinental Hotels Group in the company’s full-year 2023 earnings results call. IHG's hotel revenue per available room for the full year increased 16 percent over 2022, and the company expects to return over $1 billion in 2024 through dividends and share buybacks.

Travel demand was strong across all markets, Maalouf noted. Profit from reportable segments grew 23 percent and exceeded $1 billion for the first time. Alongside strong trading and financial performances, IHG continued to grow its portfolio and the global footprint of its brands. IHG opened 275 hotels in 2023 and signed more than double that amount—556 hotels—into its pipeline. Adjusting for the effect of the Iberostar hotels joining IHG’s system, openings for the fourth quarter grew 27 percent year on year and signings were up by 50 percent, representing one of the company’s biggest ever quarters for development activity.

“The travel industry has attractive, long-term drivers of demand, and the strength of our brand portfolio and enterprise platform will continue to boost our RevPAR and system size growth,” Maalouf said. “Combined with our scale and cost base efficiencies, this will further expand fee margin. IHG’s strong cash generation supports investment in growth initiatives, sustainably increasing our ordinary dividend and the regular return of surplus capital such as through buybacks. We look forward to an important next chapter of growth for IHG that creates long- term sustainable value for our shareholders and benefits our employees, hotel owners and communities.”

Notable highlights include:

Trading and Revenue

  • Global RevPAR was up +16.1 percent year over year (Q4 +7.6 percent); global RevPAR up +10.9 percent vs. 2019 (Q4 +12.7 percent)
  • Americas FY RevPAR up +7 percent year over year (Q4 +1.5 percent), EMEAA +23.7 percent (Q4 +7 percent) and Greater China +71.7 percent (Q4 +72 percent), reflecting the differing levels of travel restrictions that were still in place in 2022
  • Average daily rate up +5 percent vs 2022, +13 percent vs 2019; occupancy up +6 percent pts vs. 2022, 1 percentage point lower vs. 2019
  • Total gross revenue of $31.6 billion, +23 percent vs 2022, +13 percent vs. 2019

System Size and Pipeline

  • Gross system growth +5.3 percent; net system size growth of +3.8 percent
  • Opened 47,900 rooms (275 hotels), +16 percent year over year (ex. Iberostar); global estate 946k rooms (6,363 hotels)
  • Signed 79,200 rooms (556 hotels), +26 percent year over year (ex. Iberostar); global pipeline 297k rooms (2,016 hotels), +5.5 percent year over year
  • Q4 opened 19,200 rooms (117 hotels) and signed 28,300 rooms (194 hotels), one of the highest quarters on record

Margin and Profit

  • Fee margin of 59.3 percent, up +3.4 percent pts driven by trading recovery in EMEAA and Greater China
  • Operating profit from reportable segments2 of $1,019M, up +23 percent; this included $13M adverse currency impact
  • Reported operating profit of $1,066M, including a profit of $19M from System Fund and reimbursables (2022: loss of $105M) and a $28M exceptional profit (2022: $95M net exceptional charges)

Cash Flow and Net Debt

  • Net cash from operating activities of $893 M (2022: $646M), with adjusted free cash flow of $819M (2022: $565M), the latter representing 129 percent conversion of adjusted earnings (2022: 111 percent)
  • Net debt increase of $421M reflects the strong adjusted free cash flow, $1.0bn of shareholder returns and a $105m net foreign exchange adverse impact
  • Adjusted earnings before interest, taxes, depreciation and amortization of $1,086m, +21 percent vs 2022; net debt adjusted EBITDA ratio of 2.1x

Clear Framework to Drive Future Value Creation over the Medium to Long Term

  • High single-digit percentage growth in fee revenue, though combination of RevPAR and system size growth, together with 100-150bps fee margin expansion, annually on average over the medium to long term
  • 100 percent conversion of adjusted earnings into adjusted free cash flow, supporting investment in the business to optimize growth, sustainably growing the ordinary dividend and returning surplus capital