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.