IHG Hotels & Resorts plans to launch a new midscale conversion brand with potential for “considerable scale,” the company said Tuesday during its second-quarter earnings call. Meanwhile, officials said they could be more selective in sourcing corporate business in request-for-proposals season.
Business transient demand has “continued to strengthen,” IHG CFO Michael Glover said.
“We have the opportunity right now, at higher occupancies and strong demand travel, to change the mix of our customers and choose preferred ones that are willing to pay a higher rate for longer stays,” CEO Elie Maalouf said.
Globally, IHG has returned to 2019 levels “in terms of business revenue,” with still some room to improve in terms of occupancy, Maalouf said. Overall, the company doesn’t see “signs of weakness” when it comes to demand, according to Glover, as leisure demand remains “buoyant,” and meetings and events continue to outpace 2019 levels.
“Meetings and events bookings have been ahead of 2019 levels for six months now, and what’s on the books [year-to-date] is 36 percent ahead of 2019 levels for meetings and events globally,” Glover said.
Separately, groups, “which has been the slowest demand driver to recover,” Glover said, “continues to advance as forward-booking data suggests that there will be further progressive improvements to come.”
Planning a Brand
Maalouf said the company planned to announce a “midscale conversion brand,” during the earnings call, his first since succeeding previous CEO Keith Barr in July.
“We just heard from guests that they want a more trusted brand—an IHG brand—in the space, and we heard from owners that they would like to be part of the IHG space,” he said. “That’s why we’re targeting the space.”
Entering this sector does not “overlap much” with IHG’s current hotel portfolio, as the new offering is “really different,” Maalouf said. The hotel company projects its new brand will reach a portfolio of “more than 500 hotels over the next 10 years, and more than 1,000 hotels over the next 20 years” in the United States, he said.
Q2 Results
In Q2, IHG’s systemwide revenue per available room was $89.88, a 17 percent year-over-year increase and up 9.9 percent over 2019. IHG’s second-quarter average daily rate was $128.48, up 5.4 percent year over year and up 12.2 percent over 2019. IHG’s second-quarter occupancy was 70 percent, up 7 percentage points year over year, but still down 1.5 percentage points from 2019.
IHG’s Q2 increases can be partially attributed to continued “rapid recovery” in Greater China, Glover said. According to IHG, Greater China RevPAR was $47.75 in Q2, up 110 percent year over year.
Q2 Trends and Results
IHG is not seeing any softening in demand, as company executives said on the call, but rather changes in booking trends.
“There have been some structural changes in how people are traveling for leisure,” Maalouf said. “They are staying longer because they are mixing in work. Thursday used to be check-out day, Thursday now is check-in day and that’s extending the week for us, which is actually healthy for our hotels.”
Booking windows remain quite short for IHG. In the first half or 2023, “62 percent of our bookings occurred within one week and only 15 percent were greater than 31 days” Glover said. Maalouf highlighted that those short windows could be attributed to changing booking trends, and that this trend is “not necessarily an adverse development,” as it’s beneficial for hotels’ pricing power.
IHG reported total revenue of $1.03 billion in the first half of 2023, up 22.6 percent year over year.
