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The IHG third quarter results are here. They don't provide much information on financial performance, but they show promising signs of recovery in China.

IHG’s third-quarter results on Friday show the group is starting to benefit from the domestic travel resurgence in China, seeing improvements over 2019 for the first time in four years.

Revenue per available room (RevPAR) across the UK operator’s 171,000 rooms in Greater China pulled ahead of 2019 levels every month of the quarter. RevPAR increased 9.3% over 2019 in the area.

Within China, record numbers of locals are opting to do their holidays within the country, a shift that has upset external tour operators waiting for deep-pocketed groups to fly in. For IHG and other operators in the country, it has meant numbers are finally improving.

In the call, CEO Elie Maalouf said: “China signings and openings have been growing sequentially every quarter and well above 2022, in the direction of [above 2019]. It’s not a hope, it’s a reality we’re seeing.”

“Greater China continued its excellent rebound,” said Maalouf in the earning release, adding that occupancies have seen a “near-complete return to pre-Covid levels of demand,” group-wide, and “pricing remained very robust” across the board.

CFO Michael Glover said: “In China, trading has significantly improved. Growth is 9.3% [ahead of 2019]. There was particularly strong domestic leisure demand, which was reflected in July, our strongest month in July. This is also why RevPAR is up in the tier two and three cities.”

“The start of October is also an important leisure period in China. Aligned with this, IHG saw RevPAR strongly ahead of 2019 in the eight-day holiday period.“

Maalouf later said in the call that China is now one of their greatest prospects for the future, not just for recovery, but growth. He said: “There’s a lot of energy (in China), a lot of dynamism. We believe China is a tailwind for us.”

Across all regions, group RevPAR was up 12.8% above 2019 and 10.5% above 2022.

IHG Q3 2023 Results: Luxury Focus

Tucked elsewhere in the third quarter earnings today, IHG said it may see some development slowdown in the immediate future. Year-over-year the company has increased its room count by 4.7%, swelling to 929,987 rooms, but “some short-term financing challenges [are] holding back new hotel development,” said Maalouf.

IHG’s new fondness of luxury and lifestyle can also be a culprit for a potential development slow-down. Six brands fall into this camp: Six Senses, Regent, InterContinental, Vignette, Kimpton and Hotel Indigo.

Of its more than 6,000 hotels, these six brands account for 800 properties opened or in the pipeline.

At the same time IHG released its earnings, it released an ‘interview’ between its own director of investor relations and its senior vice president (SVP) of global luxury, lifestyle and premium brands, on why IHG’s focus on this segment is good news for investors.

SVP Jane Mackie said: “How (luxury and lifestyle) unlocks other revenue benefits for our owners and income for IHG, is the ability to branch into other industries, such as spas and wellness, or —critically at this moment — residential.”

“(Branded residences) enables our owners to monetize their assets at an accelerated rate. It enables us (IHG) to get deals signed… much of that residential product is part of our hotel inventory, which we can generate fees and revenue from.”

In the earnings call, CFO Glover said that the higher rates commanded by these six brands will also add to the allure of IHG co-branded credit cards. He said: “More luxury and lifestyle we have, the more attractive the offer for higher-spending of credit card customers.“

Looking forward, Maalouf said in the earning statement: “As IHG powers forward to provide industry-leading advantages for our guests and hotels owners across our brand portfolio, loyalty program and entire enterprise platform, we expect to close-out 2023 with very strong financial performance.”

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Tags: china, earnings, future of lodging, hotel earnings, ihg, six senses

Photo credit: Elie Maalouf, the new group CEO of IHG. IHG

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