IHG fights off weak demand in China

LONDON – InterContinental Hotels Group (IHG) reported global RevPAR growth of 1.5% for the third quarter of 2024 as well as a slowdown in room revenue growth partially due to continued weak demand in China and softer performance in the U.S.

Solid performance in Europe was among the highlights of IHG’s earnings report with RevPAR up 4.9% in Europe, Middle East, Africa and Asia (EMEAA), while China RevPAR fell 10.3% due to strong comparisons to a year ago, and the Americas gained 1.7% (+1.2% in the U.S.).

Third quarter occupancy in EMEAA was +0.9%pts to 74.6% and rate +3.6%. By major geographic markets within the region, RevPAR ranged from +7.1% in Continental Europe, +6.5% in East Asia & Pacific, and +2.2% in the U.K., though RevPAR was -3.2% in the Middle East.

Year-to-date global RevPAR is at +2.4%, with Americas +1.8%, EMEAA +6.4% and Greater China -5.6%.

Average daily rate was +1.7% and occupancy -0.1%pts in Q3, +1.9% and +0.4%pts respectively YTD.

Group demand remained resilient, up 6% for the quarter, while business transient was +2% and leisure broadly flat versus last year.

Growth story

IHG's net system size grew 4.1% in the third quarter. At the same time, it also reported a licensing agreement with The Venetian Resort and The Palazzo in Las Vegas will end on January 1, 2025, removing 7,092 rooms, or about 0.7% of its system, from its portfolio.

Gross system size growth was +5.9% YOY in the third quarter, +3.7% YTD. IHG opened 17,500 rooms (98 hotels) in Q3, well over double the same period last year, which was in part due to the next 6,200 rooms of the Novum Hospitality agreement joining IHG’s system.

IHG signed 19,200 rooms (129 hotels) in Q3, +14% YOY; its global pipeline of 327,000 rooms (2,218 hotels) is up 12% YOY.

In the Americas, net system size growth was +1.1% YOY and +0.6% YTD. A further 6,700 rooms (59 hotels) were added to the pipeline in the quarter, including 19 hotels signed across the Holiday Inn brand family, 17 across IHG extended-stay brands, and seven across luxury and lifestyle. There were also seven further signings for its newest brand, Garner.

In China, gross system growth was +11.9% YOY and +6.8% YTD, with 5,500 rooms (27 hotels) opened in the quarter, which is +51% more than the same quarter last year and +50% ahead year-to-date. Net system size growth was +9.6% YOY and +5% YTD. A further 6,700 rooms (40 hotels) were added to the pipeline. Cumulative signings to date in 2024 are up by over 20% on last year. For both hotel openings and signings, IHG said 2024 is heading to be one of the biggest ever years.

In EMEAA, gross system growth was +8.2% YOY and +5.3% YTD, with 8,600 rooms (47 hotels) opened in the quarter. Net system size growth was +6.6% YOY and +3.9% YTD. There were 5,800 rooms (30 hotels) added to the pipeline. Conversions represented 56% of all room signings and included two further Garner properties and eight Vignette Collection hotels.

“We are pleased with the latest trading performance and another strong period of development activity, and we are on track to finish 2024 in line with market expectations,” said IHG CEO Elie Maalouf.

Maalouf added that quicker to market conversions represented over 50% of openings and 40% of Q3 signings, “a clear reflection of the strength and appeal of our brands and wider enterprise to owners, and we’ve also seen the advance in new-build signings over the course of the year as developer confidence continued to improve,” he said.”

In Greater China, Maalouf said development momentum should lead to 2024 being “one of the biggest ever years for both hotel openings and signings in this region.”