IHG Expects Surplus Capital Return to Shareholders After Strong Q3 Performance

InterContinental Hotels Group (IHG) has announced that it anticipates returning additional surplus capital to shareholders in the future. This comes as the hotel chain reported an increase in revenue per available room (RevPar) for the third quarter compared to the same period in 2019, largely driven by robust travel demand and a strong recovery in China.

According to IHG, details of the next round of capital allocation will be disclosed in February 2023 alongside its full-year results for 2023. The final decision will take into account economic conditions and the business outlook at that time.

The company emphasized the highly cash-generative nature of its business model, expressing confidence in its ability to continuously return surplus capital to shareholders. IHG aims to achieve this through regular distributions and by gradually reducing its leverage to reach the target range.

IHG projects returning $1 billion to its shareholders in 2023 through share buybacks and dividend payments.

For the third quarter, IHG reported a respectable growth rate of 10.5% in RevPar compared to the same period last year. Additionally, RevPar outperformed the pre-pandemic levels of 2019, demonstrating sustained sequential growth for five consecutive quarters.

Notably, RevPar in greater China surged by 43% from 2022 and increased by 9.3% compared to the same period in 2019. Occupancy levels also saw a significant rise of 67%, with a 2.3-percentage point increase from 2019. However, tier 1 cities experienced a 3% decline in RevPar compared to 2019 due to the slower recovery of international travel. Meanwhile, tier 2 to 4 cities showcased a stronger performance, achieving a remarkable RevPar growth of 13%.

Furthermore, IHG's average daily rate for the period was 4.1% higher than in 2022 and 15% higher than in 2019.

While occupancy rates in the third quarter were 4.1 percentage points higher than in 2022, they fell 1.3 percentage points compared to the same period in 2019. Nevertheless, IHG stated that group-wide occupancy reached 72%, indicating a near-complete return to pre-pandemic demand levels.

"We have great confidence in IHG's business model, scale, and strategic priorities to drive sustainable and profitable growth," stated the company.