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InterContinental Hotels: RevPAR Growth Impressive, But Inflationary Pressures Continue

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Investment Thesis: I return nan position that Intercontinental Hotels Group will request to show important maturation crossed Greater China and continued grounds that RevPAR maturation tin support up pinch ADR successful bid to spot further upside successful nan banal from here.

In a erstwhile article backmost successful January, I made nan statement for a semipermanent bullish position connected Intercontinental Hotels Group (NYSE:IHG), fixed that nan institution has shown awesome maturation successful RevPAR (revenue per disposable room) successful spite of inflationary pressures.

Since my past article, nan banal is up by conscionable complete 7%:

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The intent of this article is to measure whether specified upside tin beryllium sustained - peculiarly successful ray of precocious released full-year 2022 results.

Performance

When looking astatine maturation successful comparable RevPAR for nan full twelvemonth 2022 arsenic compared to nan erstwhile year, we tin see that while that of nan Americas and EMEAA person continued to spot beardown maturation connected a percent ground arsenic compared to that of past twelvemonth - each edifice brands crossed Greater China person seen antagonistic maturation arsenic compared to that of past year.

IHG Supplementary Information - Q4 2022

IHG Supplementary Information - Q4 2022

Given that COVID restrictions person only precocious been lifted successful China and restrictions were resumed successful large cities specified arsenic Shanghai successful 2022 - it is apt that this importantly lowered RevPAR maturation imaginable crossed nan Greater China region.

With that being said, investors are apt to expect a important rebound successful RevPAR crossed Greater China successful bid to warrant further maturation successful wide RevPAR going forward. We tin spot that while RevPAR maturation for EMEAA was very beardown astatine 92.2% - nan Americas encompass nan mostly of nan IHG edifice portfolio - which saw much humble maturation of 28.3% successful nan past year.

As such, investors whitethorn reasonably expect that RevPAR maturation crossed EMEAA could commencement to mean from present - pinch a rebound successful maturation crossed Greater China accounting for a larger information of wide RevPAR maturation going forward.

When looking astatine wide net performance, we tin spot that adjusted EPS is up powerfully connected that of 2021 by 92%, whereas nan aforesaid still remains 7% beneath that of full-year 2019 levels.

 2022 Full Year Results

IHG Hotels and Resorts: 2022 Full Year Results

I had antecedently commended Intercontinental Hotels Group connected its capacity to trim its nett indebtedness - having decreased nan aforesaid by $163 cardinal for nan first half of 2022.

 2022 Full Year Results

IHG Hotels and Resorts: 2022 Full Year Results

On a full-year basis, we tin spot that this inclination has continued - pinch nett indebtedness having decreased by $30 cardinal arsenic compared to past year.

Risks and Looking Forward

Going forward, I return nan position that nan capacity of Intercontinental Hotels Group to spot further maturation will hinge importantly connected nan capacity of maturation crossed nan Greater China market, fixed nan lifting of COVID lockdowns earlier this year. As mentioned, pinch RevPAR maturation crossed nan Americas starting to plateau, nan Greater China is apt to go progressively important successful sustaining wide RevPAR growth.

Moreover, nan consequence besides remains that inflationary pressures could progressively impact RevPAR maturation - pinch request starting to perchance level disconnected successful nan look of value increases.

For instance, erstwhile looking astatine nan Kimpton marque (which showed nan highest RevPAR for Q4 2022), we tin spot that while ADR (average regular rate) is up by 23.7% connected that of 2019 - maturation successful RevPAR is up by 7.7%, which indicates that gross maturation has not been keeping up pinch value increases. For nan Americas arsenic a whole, RevPAR maturation has been 9.1% arsenic compared to 11.7%, and we tin spot that higher-priced brands by ADR much mostly person shown little RevPAR maturation connected a percent ground compared to those pinch a little ADR.

IHG Supplementary Information - Q4 2022

IHG Supplementary Information - Q4 2022

From this standpoint, I return nan position that inflationary pressures could beryllium a consequence facet if we proceed to spot wide RevPAR autumn down that of ADR growth.

Conclusion

To conclude, Intercontinental Hotels Group has continued to spot a beardown rebound successful net growth. However, location are signs that maturation crossed nan Americas is starting to plateau, and nan spread betwixt maturation successful RevPAR and ADR is getting wider.

From this standpoint, I return nan position that Intercontinental Hotels Group will request to show important maturation crossed Greater China and continued grounds that RevPAR maturation tin support up pinch ADR successful bid to spot further upside successful nan banal from here.

This article was written by

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I americium an independent investor pinch an liking successful analyzing stocks crossed nan consumer, finance, telecommunication, and recreation sectors. As a information scientist, I besides person a awesome liking successful utilizing information devices to amended understand a company's financial position.Some examples include:- Aggregating quarterly churn and ARPU information for Deutsche Telekom (DTEGY) and analysing trends complete clip utilizing SQL: https://seekingalpha.com/article/4516805-deutsche-telekom-growth-potential-remains- Building a Monte Carlo simulation successful Python to analyse nonaccomplishment ratios for Zurich Insurance Group (ZURVY): https://seekingalpha.com/article/4459821-zurich-insurance-stock-solid-insurance-company-still-faces-risks- Examining ADR and RevPAR trends by marque for Hilton Worldwide Holdings (HLT) utilizing SQL: https://seekingalpha.com/article/4517248-hilton-worldwide-holdings-an-analysis-of-adr-and-revpar-trendsDisclaimer: All of nan author's articles are written connected an "as is" ground and without warranty. They correspond nan author's sentiment only and successful nary measurement represent master finance advice. It is nan work of nan scholar to behaviour their owed diligence and activity finance proposal from a licensed master earlier making immoderate finance decisions. The writer disclaims each liability for immoderate actions taken based connected nan accusation contained successful immoderate articles published.

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Additional disclosure: This article is written connected an "as is" ground and without warranty. The contented represents my sentiment only and successful nary measurement constitutes master finance advice. It is nan work of nan scholar to behaviour their owed diligence and activity finance proposal from a licensed master earlier making immoderate finance decisions. The writer disclaims each liability for immoderate actions taken based connected nan accusation contained successful this article.

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