InterContinental Hotels Group (IHG) announced plans on Friday to return surplus capital to shareholders, driven by a significant increase in Revenue Per Available Room (RevPar), particularly in greater China. The decision comes on the back of a robust recovery in travel demand and a cash-generative business model that has seen five consecutive quarters of sequential growth surpassing pre-pandemic highs. This aligns well with the InvestingPro Tips that highlight IHG's high earnings quality, with free cash flow exceeding net income and the management's aggressive share buyback strategy.
The hotel group stated it will disclose capital allocation details, including a $1 billion return through share buybacks and dividends, alongside its full-year results in 2023. IHG, with its adjusted market cap of 11.9B USD according to InvestingPro Data, reported a 13% rise in RevPar in Tier 2 to 4 cities, indicating a strong recovery in these regions, despite a decrease in Tier 1 cities.
The company's average daily rate and occupancy rate have exceeded figures from previous years, with group-wide occupancy nearing pre-pandemic levels. This positive performance is an encouraging sign for the hospitality industry, which has been hard hit by global travel restrictions and lockdowns over the past few years. The company's revenue growth, at 24.45% according to InvestingPro Data, further substantiates this recovery.
IHG remains committed to its strategic growth priorities, which have helped drive its strong recovery. The planned return of capital to shareholders underlines the company's confidence in its future prospects and its ability to generate consistent returns, even in a challenging operating environment. The company's consistent increase in earnings per share, one of the InvestingPro Tips, and the P/E ratio of 20.5 as per InvestingPro Data, further reflect the company's strong financial position and potential for growth.
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