ii view: check-ins busier at InterContinental Hotels

IHG has seen a marked sales improvement over 2020, but it's not yet back to pre-pandemic levels. We assess prospects. 

Third-quarter trading update to 30 September

• Group revenue per available room up 66% versus the Covid hit 2020
• Group revenue per available room down 21% compared to the pre-pandemic 2019 period
• Occupancy of 60% achieved, up from 40% in the first quarter

Chief executive Keith Barr said:

"Trading continued to improve significantly in the third quarter. RevPAR recovered closer towards pre-pandemic levels as more and more guests returned to our hotels around the world. 

“Domestic leisure demand was particularly strong in a number of markets over the summer, where occupancy and rate climbed back to 2019 levels. Discretionary business travel, group bookings and international trips have also shown increasingly encouraging signs, on top of continuing good levels of essential business demand.”

ii round-up:

Hotel operator InterContinental Hotels (LSE:IHG) today reported a sizeable recovery in quarterly room revenues as travel restrictions eased over the summer and bookings rebounded. 

Revenue per available room (RevPAR) for the three months to the end of September rose by 66% compared to Covid-hit 2020, although was still down 21% from pre-pandemic period n 2019. Broker Morgan Stanley expects to retain its existing full-year adjusted profit forecast following the broadly in line update. 

Intercontinental shares fell by just over 2% in UK trading, having risen by over 80% from pandemic induced market lows back in March 2020. Shares of UK and German budget hotel operator Whitbread (LSE:WTB) are up by just over 50% in that time.

InterContinental operates over 6,000 hotels across more than 100 countries. The 21% fall in room revenues compared to the 2019 third quarter is an improvement on the 36% decline suffered in the second quarter. 

Its Americas business enjoyed a 76% jump in room revenues compared to 2020, while its European, Middle East, Asia and African (EMEAA) division reported an 86% increase. RevPAR for Greater China, the first into the Covid crisis, retreated by 8% compared to 2020, hit by a temporary reintroduction of Covid restrictions in August. 

A total of 4,700 net new rooms were added during the quarter, leaving its total number of rooms flat year-over-year at around 889,000. InterContinental franchises its brands to, and manages hotels on behalf of, third-party hotel owners.

Full-year results are likely to be announced in February. 

ii view:

InterContinental's brands include Crowne Plaza, Kimpton, Candlewood Suites, Regent, Hualuxe and InterContinental itself. The hotelier offers diversity in both its brands and market positioning, along with its geographical breadth. 

For investors, an ongoing absence of outlook guidance from management suggests a continued high degree of uncertainty. An estimated forward price/earnings ratio above the 10-year average also suggests the shares are not obviously cheap.

On the upside, signs of trading recovery are broadly evident. Cost savings continue to be found, while a longer-term expansion of hotel numbers and rooms is still being pursued. In all, and with the current analyst estimate of fair value per share of £50.55 sat close to the prevailing share price, the shares currently look to be up with events.

Positives: 

• Strong and diverse brand portfolio
• Making cost savings 

Negatives:

• Dividend payment suspended
• Uncertain outlook and potential for renewed hotel closures

The average rating of stock market analysts:

Strong hold