Holiday Inn owner IHG affected by Chinese crisis

Intercontinental Hotel Group’s growth rate halved during the third quarter amid continued struggles in the Chinese market.

The Holiday Inn owner reported that revenue per available room (RevPAR) increased just 1.5 percent year over year in the three months ending in September, compared to 3.2 percent in the previous quarter.

RevPAR in Greater China fell 10.3 percent, with ‘Tier 2 to 4 cities’ falling at twice the rate of larger Tier 1 cities: 12.2 percent vs. 6.1 percent cent, respectively.

IHG said the result reflected the strong comparative rebound in domestic travel last year, the holiday season and a series of typhoons in September.

Hainan Island, often nicknamed the Hawaii of China, was hit by Super Typhoon Yagi, the most powerful storm to hit Asia this year.

Shortly afterward, Shanghai was hit by Typhoon Bebinca, the strongest storm to hit the financial center in 75 years, prompting the city to briefly halt all air, sea and land transportation.

The demand was partially offset by a shift among Chinese customers toward overseas leisure travel, particularly to the East Asia and Pacific region, where IHG’s RevPAR rose 6.3 percent.

IHG also achieved strong results in continental Europe, with its RevPAR increasing by 7.1 percent, and in the Canada, Latin America and Caribbean region, which enjoyed aggregate growth of 6.2 percent.

While its resort-wide occupancy rates fell 2.1 percentage points to 64.9 percent, the company was boosted by record group bookings and increased demand from business travelers.

Elie Maalouf, chief executive of IHG, said: “We are pleased with the latest trading performance and another strong period of development activity.”

Consequently, the FTSE 100 business, which also owns the Crowne Plaza and Hotel Indigo brands, expects to end 2024 “in line with market expectations”.

Additionally, it expects to deliver more than $1 billion to shareholders, including $800 million in share buybacks and about $255 million in regular dividend payments.

IHG has recovered strongly since the easing of pandemic-related restrictions that caused substantial financial damage to the global tourism industry.

Mark Crouch, an analyst at eToro, said: “Even the most optimistic IHG investor will have been pleasantly surprised by the success the luxury hotel owner has achieved in recent years.”

He added that despite weak economic growth in China, recent interest rate cuts and proposed stimulus measures could be “the catalyst to unlock pent-up momentum, giving IHG more momentum in the process.”

IHG stock They rose 0.8 per cent to £86.32 on Tuesday morning, meaning they are up about 49 per cent in the last 12 months.