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InterContinental Hotels Group PLC ADR IHG

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InterContinental’s Demand Recovery Improving, as Quality Control Supports Its Brand Advantage

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

InterContinental's first-quarter revenue per available room, or revPAR, was 49% of 2019 levels, up slightly from the 47% mark reported last quarter, although the metric improved to 53% in March from 47% in February. InterContinental’s U.S. segment (estimated around half of rooms) is an area of strength, driven by improved vaccination rates and government stimulus, with the company’s first-quarter revPAR reaching 60% of prepandemic levels. And U.S. demand is strengthening, with summer month booking volume ahead of 2019 levels and April revPAR around 70% of pandemic marks versus 63% in March. Meanwhile, Greater China (about 15% of rooms) is also seeing a robust rebound in demand, aided by the recent removal of domestic travel restrictions. This is witnessed by first-quarter revPAR achieving 62% of prepandemic levels and commentary that both leisure and group travel is now near 2019’s mark. But Europe’s (around 20% of rooms) recovery is pacing a few months behind the U.S., as vaccination rates and restriction removals have lagged. In fact, Europe’s revPAR was just 13% of 2019 levels in the first quarter. Overall, we think InterContinental’s 2021 revPAR can return to around high-60% of 2019 levels, with a full recovery by 2023, as vaccination rates lift around the world. As a result, we don’t expect a material change in our $58 fair value estimate, leaving shares overvalued.

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Company Profile

Business Description

InterContinental Hotels Group operates 886,000 rooms across 16 brands addressing the midscale through luxury segments. Holiday Inn and Holiday Inn Express constitute the largest brand, while Hotel Indigo, Even, Hualuxe, Kimpton, and Voco are newer lifestyle brands experiencing strong demand. The company launched a midscale brand, Avid, in summer 2017 and closed on a 51% stake in Regent Hotels in July 2018. It acquired Six Senses in February 2019. Managed and franchised represent 99% of total rooms. As of Dec. 31, 2020, the Americas represents 58% of total rooms, with Greater China accounting for 16%; Europe, Asia, the Middle East, and Africa make up 26%.

Broadwater Park
Denham, Buckinghamshire, UB9 5HR, United Kingdom
T +44 1895512000
Sector Consumer Cyclical
Industry Lodging
Most Recent Earnings Dec 31, 2012
Fiscal Year End Dec 31, 2021
Stock Type
Employees 13,002


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