IHG announces stock buyback and dividend, but key hotel metrics still down from 2019
Despite half-year and second-quarter revenue per available room slightly below 2019 levels, IHG Hotels & Resorts executives are buoyed by performance they say heralds a new era in hotel industry health , a sizable share buyback program and the reinstatement of a significantly higher dividend than its last in 2019.
The RevPAR of the UK hotel company’s portfolio for the first half and second quarter of the year compared to 2019 levels was down 10.5% and 4.5%, respectively.
On a call with analysts to discuss IHG semester 2022 revenue, CEO Keith Barr said the share buyback would consist of $500 million in excess capital being returned to shareholders.
For the first time since the COVID-19 pandemic, IHG announced a dividend payout of 43.9 cents per share payable in October, a level 10% higher than in 2019.
During the conference call, analysts questioned why IHG’s latest results were lower than those of Marriott International and Hilton, although at press time the company’s shares were trading at £49.34. ($59.63) per share, a 9.2% year-over-year increase.
The London Stock Exchange‘s FTSE 100 index rose by about half that performance, by 4.5% over the same period.
Barr said IHG’s hotels in the Americas region were the catalyst for global performance, with second quarter RevPAR outperforming the same period in 2019 by 3.5%.
IHG opened 96 hotels and 14,900 rooms in the first six months of 2022, bringing its total portfolio to 6,028 hotels and approximately 883,000 rooms. It signed 210 hotels and 30,700 rooms during the period, with a pipeline of 1,858 hotels and approximately 278,000 rooms.
The overall size of IHG’s network was affected by the company’s decision to pull out of Russia following that country’s invasion of Ukraine, Barr said.
He added that IHG was “well on the road to recovery and moving closer and closer to overall 2019 performance levels.” … We have seen strong momentum building in 2022.”
Paul Edgecliffe-Johnson, IHG’s chief financial officer and head of group strategy, said first-half 2022 revenue was $840 million, up 49% from 2021 but down. 17% over 2019. Operating profit of $377 million represented a 10% increase over 2021 but an 8% decrease over 2019.
Barr highlighted the continued renovation of the Crowne Plaza brand, saying that in 2022, IHG renovated the same number of hotels under this brand as in the previous four years.
Edgecliffe-Johnson said the removal of hotels from IHG’s portfolio — primarily hotels in Russia — caused the overall network to decline by 1.8%, a percentage that was eaten up by new signings.
He said IHG’s goal of growing its network by around 4% for the year will be a challenge, especially as some signed hotels in China have not opened due to ongoing coronavirus restrictions. pandemic.
The end of restrictions across Europe and some return of business travel there, however, give cause for optimism, he said.
“Working capital saw an outflow, primarily due to an increase in receivables driven by stronger RevPAR and a reduction in payables after bonus payments compared to the prior year,” he said. he declares.
Barr said the company’s strategy was reflected in first-half performance — driving growth through investment, increasing dividends through sustainable means and returning more funds to shareholders.
He added that travel spending has proven to be among the most resilient areas of discretionary income, acknowledging that inflation and energy prices are both concerns.
“The increase in pricing power,” he said, translates to a 4% increase in the global average daily rate compared to the first half of 2019 and a 7.2% increase in the second quarter alone.
“Customers want to travel the world,” he added.
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