Market News

Holiday Inn owner IHG sees profits soar as travel demand surges

Story Highlights

Crucial measures of hotel performance nearly hit pre-pandemic levels in the first half of 2022, and IHG has surfed the wave of returning business and group travel.

The post-Covid bounceback in demand for travel has seen Holiday Inn owner IHG (GB:IHG) achieve surging half-year profits – as demand for hotel rooms approaches pre-pandemic levels. 

Intercontinental Hotels Group said it was reintroducing an interim dividend at a level 10% higher than when it  last paid out in 2019, and also introduced a £414 million share buyback

Pre-tax profits jumped to $299m U.S. (£248 million) in the six months up to June 30, compared to $67m (£55m) in the previous year. 

Back to pre-pandemic levels

In the UK market in particular, certain key measurements of performance for hotel chains were approaching pre-pandemic levels, with revenue per available room (RevPAR) down 2% in the second quarter down 2% compared to 2019.

Keith Barr, chief executive officer for IHG Hotels & Resorts, said “We saw continued strong trading in the first half of 2022 with increased demand for travel in most of our markets,”

“This brought the group RevPAR very close to pre-pandemic levels in the second quarter. 

Business travel returns

Barr said that business and group travel had also returned in the first half of 2022, boosting results still further.

“Alongside leisure stays, the return of business and group travel demand continued to build over the period, and our hotels are seeing increased pricing power due to the strength of IHG’s brands, loyalty programme and technology platform.”

The company said that its central buying programme was enabling hotel owners in the UK to make savings of up to 15% on drink and food

View from the City

According to TipRanks’ analyst rating consensus, IHG stock has a Moderate Buy rating, based on five Buy and four Hold ratings. 

The average price target is 5467.50p, which is 8.74% higher than the current price level. The stock has a high forecast of 5900p and a low forecast of 4900p.

Conclusion

Amid a challenging market, IHG is still performing well and using its scale to achieve savings for hotel operators. But will the post-pandemic bounce last? 

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