IHG touts health of key recovery metric: group business

The shock of COVID isolated the significance of group business, defined as a booking of 10 rooms or more per night. It makes sense: Groups bring in big dollars. Beyond a block of paid-for rooms, groups typically spend more than transient customers on food and beverage and other ancillary products.

Group business on the books also also has revenue management benefits, enabling better pricing for both leisure and corporate transient business and less reliance on discounting rates.

So, here’s the good news: group business is coming back. Strong. And the newest one to report its vigor is InterContinental Hotels Group, which, on its fourth-quarter earnings call, reported that its group RevPAR is “back close to 2019 levels,” as said by Keith Barr, CEO of IHG Hotels & Resorts. “Looking to 2023, while there are economic uncertainties, we expect continued strong leisure demand in many markets, alongside further return of business and group travel and the ongoing reopening of China.”

China, where IHG has exposure with more than 600 hotels, dragged down full-year metrics as the country continues to open after stringent COVID rules and lockdowns throughout the year. Compared to 2019, RevPAR in China was down 38%, which had a drag-down impact on global RevPAR, which was down 3.3%. During times of 2022, IHG said one-third of its hotels in Greater China were either closed or used for quarantine. “Covid restrictions challenged the ability to complete and open new build hotels, with this being an ongoing issue in Greater China through 2022,” IHG said in a release. “Other markets have also seen the temporary impact on the industry from costs and availability of construction crews and materials, and the macro-economic outlook affecting the availability and cost of real estate financing.”

Bright spots were the Americas, which was up 3.3% compared to 2019. Other propitious news included an average daily rate of  +8% compared to 2019, despite a 7-percentage-point decline in occupancy versus the same period.

Still, IHG remained unbowed despite the global pressures on its business. “Our strategy over the last five years has significantly strengthened our brand portfolio,” said Barr, highlighting its recent agreement with Iberostar, which was signed last November and added some 70 hotels to IHG’s system as the company’s 18th brand.

Barr added that IHG could be on the lookout for other similar regional plays, stating, “We continue to explore further new opportunities like this for additional growth through exclusive partners.”

On the development front, IHG signed 467 hotels in 2022 and opened 269, which led to net system growth of over 4%. Holiday Inn and Holiday Inn Express delivered around a third of IHG’s hotel signings and half of openings.

Full-year revenue for IHG hit $1.8 billion, which, though below analyst expectations, was 33% higher than 2021. Profit for the year was $828 million and was 55% higher than 2021.