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Holiday Inn owner IHG sweetens shareholder returns on travel rebound
Global Banking & Finance Review®
Company
By Muhammed Husain
(Reuters) – IHG announced a $500 million share buyback on Tuesday after half-year profit more than doubled, boosted by higher room prices, strong demand for leisure travel and a recovery in business stays, especially in the United States.
Hotel operators are benefiting as people spend more on travel and book longer hotel stays, lifting occupancy rates and prices, although they are facing risks from stubborn inflation and cost-of-living woes worldwide.
IHG’s shares, however, slipped 1.2% to 4,953 pence, as analysts fretted over the number of hotel rooms it added in the first half and said the group’s performance paled in comparison with U.S. peers Marriott and Hilton.
“Hilton and Marriott both beat by double digits in Q2 and had total EBITDA ahead of 2019 so this (IHG results) should be taken as slightly disappointing, especially with no FY guidance to give comfort,” Berstein analysts said in a note. EBITDA is earnings before interest, tax, depreciation and amortisation.
IHG, owner of Crowne Plaza, Regent and Hualuxe, said profitability in the Americas, its largest market, had surpassed pre-pandemic levels, driven mainly by domestic leisure demand.
Second-quarter revenue per available room (RevPAR) – a key measure of profitability – for the Americas was 3.5% above 2019.
Net growth in IHG’s number of rooms stood at 3% in the first half of the year, partially hit by the group’s exit from Russia. Analysts on average expect 4% net system size growth for the full year.
“Whilst the economic outlook faces uncertainties as central banks and governments take action to manage inflation, we remain confident in our business model,” IHG chief executive officer Keith Barr said in a statement.
Operating profit for the six-month period ended June 30 rose to $361 million, compared with $138 million last year.
The group, which has already resumed final dividend payments, reinstated its interim dividend at 43.9 cents, a level 10% higher than when it was last paid in 2019.
(Reporting by Muhammed Husain and Yadarisa Shabong in Bengaluru; Editing by Kirsten Donovan and Bradley Perrett)
A share buyback is when a company purchases its own shares from the marketplace, reducing the number of outstanding shares and often increasing the value of remaining shares.
RevPAR stands for Revenue Per Available Room. It is a key performance metric in the hotel industry that measures revenue generated per available room.
A dividend is a payment made by a corporation to its shareholders, typically from profits. It is often distributed in cash or additional shares.
Profitability refers to a company's ability to generate earnings compared to its expenses and other costs incurred during a specific period.
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