IHG plans new midscale brand

IHG Hotels & Resorts is set to launch a new brand targeted at midscale conversion opportunities. During the company’s H1/Q2 2023 earnings call with investors, the company’s new CEO Elie Maalouf said the current midscale segment is “a space ripe for share gains,” and that the as-yet-unnamed brand will target both existing branded and independent supply, which he estimated is currently split “roughly 70/30” in the U.S. 

Maalouf said the IHG team expects conversions to the new brand to cost around 25 percent less than the cost of a Holiday Inn Express conversion, and that this will attract new owners to the company. “Owners will leverage the scale and skills of IHG's enterprise platform, including our distribution channels and the loyalty program to drive performance, increase efficiency and earn superior returns at a lower capital cost to convert,” he told the investors. More than 80 owners have already expressed “definitive interest” in opening as many as 100 hotels under the new flag, Maalouf told investors during the call. “We project the brand to reach an estate of over 500 hotels over the next 10 years and more than 1,000 hotels over the next 20 years—and that's just in the United States.”

By the Numbers

For the first half of 2023, revenue per available room at IHG hotels improved year over year across all markets and has now exceeded 2019 pre-pandemic peaks for four consecutive quarters. H1 global RevPAR was up 24 percent year over year and up 8.7 percent compared 2019. Q2 RevPAR was up 17 percent year over year and up 9.9 percent vs. 2019. This follow’s Q1’s RevPAR improvement of 6.8 percent over 2019. In the Americas region, RevPAR was up 11 percent year over year. 

The company reported $15.2 billion total gross revenue for the first half of the year, up 29 percent compared to 2022 and up 12 percent vs. 2019. IHG posted pretax profit of $567 million for the two quarters, up 90 percent year over year on revenue of $2.23 billion and up 25 percent from the year prior.

System Growth

IHG’s gross growth was 6.3 percent and net growth was 4.8 percent for the first half of the year. The company opened 108 hotels, 40 percent more rooms than H1 last year, and signed 239 hotels, 11 percent more rooms than last year. “We continued to successfully capture conversion opportunities which represented around 40 percent of signings and openings,” Maalouf said. “And our pipeline increased 3 percent year-on-year to more than 286,000 rooms representing 31 percent of today's system size.” CFO Michael Glover said the company signed more than 34,000 rooms during the two quarters, an increase of 11 percent over the same period last year. In the Americas regions, signings were up almost 16 percent compared to the first half of 2022, particularly in the second quarter.

During in the first of 2023, conversions represented 36 percent of signings and 42 percent of openings globally. As of the end of June, IHG had a global system of 6,227 hotels, around 925,000 rooms, weighted 68 percent across midscale segments and 32 percent across upscale and luxury. “IHG has 4 percent of the global industry's open rooms, but we have over 10 percent of the pipeline,” Maalouf said. “This puts us in a strong position to continue increasing our scale and capturing market share.”

In total, IHG has 925,000 rooms open across more than 6,200 hotels in more than 100 countries.

A version of this story ran on Hotel Management's sister site Hospitality Investor