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Weak China demand puts brakes on Holiday Inn owner IHG in third quarter

by Stephanie Irvin
in Real Estate
Weak China demand puts brakes on Holiday Inn owner IHG in third quarter
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HOLIDAY Inn owner InterContinental Hotels Group (IHG) reported a sharp slowdown in room revenue growth in the third quarter as weak demand in China and a subdued US market overshadowed a solid performance in Europe.

Revenue per available room (RevPAR)- a key performance measure for the hotel industry – rose by 1.5 per cent in the quarter ended Sep 30, IHG said on Tuesday (Oct 22), slowing from 3.2 per cent growth in the three months prior.

RevPAR grew 4.9 per cent in the Europe, the Middle East, Africa and Asia region, while in China, RevPAR fell 10.3 per cent as last year’s strong domestic travel recovery faded.

IHG shares were down 1.8 per cent at 8,412 pence early on Tuesday, after rallying 20 per cent this year as the group saw rising demand and lifted prices.

After a recent boom in the travel industry, customers are beginning to baulk at elevated prices as demand normalises to pre-Covid levels in many markets while in China IHG saw a shift in demand away from domestic tourism to overseas travel within the Asia-Pacific.

IHG’s licensing agreement with The Venetian Resort and The Palazzo in Las Vegas will end on Jan 1, 2025, removing 7,092 rooms or about 0.7 per cent of its system from its portfolio, the owner of the Crowne Plaza and Regent hotel chains said.

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“We do expect IHG to relatively under perform US peers, with 1.5 per cent RevPAR growth expected to be at the bottom of the pack for Q3,” Richard Clarke at Bernstein said in a note, ahead of quarterly results from Hilton on Wednesday and Marriott on Nov 4.

Clarke said that a key question for management would be how they plan to accelerate RevPAR back to about 3 per cent in the fourth quarter.

The company said it expects to close 2024 in line with market expectations. For 2024, analysts on average expect the firm to post RevPAR growth of 2.6 per cent, according to a company compiled consensus.

IHG’s net system size – the number of new rooms opened minus those that are closed – grew 4.1 per cent in the third quarter. REUTERS

Tags: BrakesChinademandHolidayIHGInnOwnerPutsQuarterWeak
Stephanie Irvin

Stephanie Irvin

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