Coming out of the COVID-19 pandemic, there were plenty of reasons to be optimistic for the travel and hospitality industry, and IHG Hotels & Resorts believes investor interest in the sector is growing.
Speaking on a call with analysts after the release of the company’s Q4 results, CFO Paul Edgecliffe-Johnson said that IHG had seen an uptick in franchise enquiries.
“Yes, we are encouraged by the signings environment. I think that our step-up in franchise applications was pleasing and really demonstrates the power of our brands. Our owners clearly want to open up more hotels because they made very good returns,” Edgecliffe-Johnson said.
Business improved “significantly” from 2020 with revenue per available room approximately 46 percent higher and occupancy reaching record highs in some markets, CEO Keith Barr said. By the fourth quarter, global RevPAR was down 17 percent from 2019, with nearly half of the company’s hotels back to prepandemic levels. “In December, the Americas was actually up on 2019,” he said. This improvement, along with the actions the company has taken to deliver sustainable cost reductions, meant that earnings before interest and taxes more than doubled. Revenue of $1.4 billion and operating profit of $534 million increased 40 percent and 144 percent, respectively, from 2020.
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During the year, IHG added 44,000 rooms to its system but removed 50,000 rooms. “Nearly 70 percent of these removals related to Holiday Inn and Crowne Plaza,” Edgecliffe-Johnson said. Toward the end of the year, the company sold its three owned Even hotels in the Americas, maintaining franchise contracts. During the call, Edgecliffe-Johnson said that the hotels contributed a loss of $3 million in 2021.
These additions and removals brought the company’s net system size growth to minus-0.6 percent year over year and on a two-year basis to minus-0.4 percent.
“Our owners clearly want to open up more hotels because they make very good returns,” Edgecliffe-Johnson said, noting that many types of real estate investment are now “off the table” for many people with capital. “So more and more capital is being focused into hotels, and ... we have a very high share of the signings in the industry.”
The company signed deals for 18,000 rooms in the Americas, taking the regional pipeline to 97,000 rooms. Globally, the company signed 23,700 rooms in Q4—close to levels achieved in 2019—with the strongest increase in the Europe, Middle East, Africa and Asia region. “Clearly, there is still room for it to recover back to what we were seeing in 2018 or so,” Edgecliffe-Johnson added. “That's partly about the financing environment. So once financing eases up and supply chains ease, then I think that we will see more signings come through, which will take our level of openings over time even higher.”
A version of this story appeared on Hotel Management's sister site, Hospitality Insights.