IHG to launch midscale conversions brand this year in U.S.

Presenting his first earnings report since taking over on Aug. 8 as IHG’s CEO, Elie Maalouf, said that strong performance of his firm's hotels was driven by healthy demand from leisure travelers—and the first hints of revived travel to and from China.

The new brand on the horizon, planned for a launch later this year, will be “targeted at midscale conversion opportunities,” he said, adding there is already strong investor appetite, with 100 hotels being currently discussed. Quoting numbers from CoStar, he said the midscale segment is expected to grow revenue annually to $18 billion by 2030 just in the U.S., and 26 per cent of hotels across the segment are independent.

Maalouf said the plan is to open 500 U.S. hotels under the new brand over the next decade, increasing to 1,000 by 2043. He added conversion to the brand will cost hotel owners 25 per cent less than a Holiday Inn Express, another one of IHG's brands. In a statement to the London Stock Exchange, IHG posted a jump of 24 per cent in year-over-year total group revenue and the same percentage increase in revenue per available room. RevPAR was a 6.8 per cent improvement over 2019 levels in the first quarter of this year, and a 9.9 per cent improvement in the second quarter, Maalouf said.

Pipeline Boost

The company’s pipeline increased by 3.3 per cent year over year and now constitutes 286,000 keys, which if all opened represents a 30 per cent increase on its current portfolio size. Maalouf said economic conditions such as inflation and labour costs, especially in Europe and China, posed definite challenges, but he sees no end to the high leisure demand being experienced in most markets—especially in the Americas. Michael Glover, who started his role as chief financial officer on March 20, added IHG’s fee margin also has increased by 3.3 per cent over last year, helped by strong ADR across the industry and segments.

He said IHG's $750 million stock buyback scheme has acquired more than 5.1 million shares—47 per cent of the buyback total, at a cost of almost $350 million. Maalouf added the luxury hotel segment is spearheading the push in both room count and rack rate. Luxury hotels made up 26 per cent of all IHG signings in the first half of 2023.

Conversions were 36 per cent of signings in the first half and 42 per cent of openings. As of press time, IHG stock was trading at £57.68 ($73.39) a share, an increase of 15.6 per cent year over year. The London Stock Exchange’s FTSE 100 index was up 0.47 per cent over the same period.