IHG Reports Strong First-Quarter Growth Driven by EMEAA and Japan

Intercontinental Hotels Group (IHG) reports 2.6% increase in room revenue for Q1 2024, driven by strong performance in EMEAA region and Japan. IHG's CEO outlines strategy for high single-digit growth in fee revenue, with plans to return over $1 billion to shareholders in 2024.

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Emmanuel Abara Benson
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IHG Reports Strong First-Quarter Growth Driven by EMEAA and Japan

IHG Reports Strong First-Quarter Growth Driven by EMEAA and Japan

Intercontinental Hotels Group (IHG), the global hospitality giant behind well-known brands such asHoliday Innand Crowne Plaza, has reported a 2.6% increase in room revenue for the first quarter of 2024.

The growth was primarily driven by strong performance in the Europe, Middle East, Asia, and Africa (EMEAA) region, and also in Japan, despite a slight decline in the United States market.

Why this matters: The hospitality industry's performance is often seen as a bellwether for the overall health of the economy, making IHG's strong growth a positive sign for global economic recovery. The hospitality industry's performance is often seen as a bellwether for the overall health of the economy, making IHG's strong growth a positive sign for global economic recovery.

The travel industry recovery from the pandemic continues, and IHG's success could have a ripple effect on related industries such astourism and transportation.

According to IHG CEO Elie Maalouf, "There was an impressive performance in EMEAA, which was up nearly 9%." The region saw significant growth in key markets, with room revenue rising 16.9% in Japan, 10.2% in Australia, 7.4% in the Middle East, and 6.2% in Continental Europe. Japan's outstanding performance was attributed to a weaker yen, increased travel activity around the Chinese New Year, and the easing of travel restrictions.

In contrast, the United States market experienced a slight setback, with room revenue declining by 0.3%. However, IHG remains optimistic about the overall demand for leisure travel. Maalouf stated, "Travel still remains key to what people want to do." The company's gross system size growth was up 5% in the first quarter, indicating continued expansion efforts.

Maalouf outlined his strategy for the company, targeting high single-digit growth in fee revenue by increasing revenue per room and the number of hotels annually on average over the medium to long term. He emphasized the strength of IHG's brand portfolio and enterprise platform in driving RevPAR (revenue per available room) and system size growth.

IHG has announced plans to return over $1 billion (€924 million) to shareholders in 2024. The company launched an $800 million (€740 million) share buyback program in February, demonstrating its commitment to creating value for investors. IHG also aims to build the scale of its luxury and lifestyle properties while maintaining its strong presence in the mid-scale segment.

Despite the positive developments, IHG's stock fell 1.27% to 7,788 pence in early trading, reflecting investor reactions to a first-quarter revenue that slightly missed analyst expectations. Analysts at Jefferies noted that the 2.6% revenue growth was lower than their estimate of 3.4%.

The travel industry's ongoing recovery from the COVID-19 pandemic's impact is underscored by IHG's first-quarter performance, which demonstrates the resilience of the hospitality sector and the company's ability to adapt to changing market conditions. With a strong focus on growth in key regions and a commitment to shareholder value, IHG is well-positioned to capitalize on the long-term drivers of demand in the travel industry.

Key Takeaways

  • IHG reported a 2.6% increase in room revenue for Q1 2024.
  • EMEAA region drives growth, with Japan up 16.9% and Australia up 10.2%.
  • The US market declined 0.3%, but IHG remains optimistic about leisure travel demand.
  • IHG targets high single-digit growth in fee revenue and plans to return $1 billion to shareholders.
  • The company's stock falls 1.27% despite strong growth, due to revenue missing analyst expectations.