IHG Eyes Biz Travel Through Lens of Workplace Changes

IHG Hotels & Resorts on Tuesday posted global group operating profit of
$494 million for full-year 2021, swinging into the black from 2020’s $153
million operating losses. Full-year revenue reached $2.9 billion, gaining 21
percent on full-year 2020. While not yet reaching 2019 levels, those numbers gave
IHG executives “confidence in the shape of this recovery and things to
come,” said CEO Keith Barr. 

For business travel, where room nights in the U.S. were down
8 percent in the fourth quarter compared to 2019 levels and rate was
down not even 5 percent, IHG execs are seeing opportunities shaping up
differently than prior to the pandemic, and they are positioning brands to take
advantage. 

Like Choice and Wyndham, IHG enjoyed a
buoyant “non-discretionary” business travel market during the pandemic.
Brands like Crowne Plaza and Holiday Inn proved resilient, and the company’s
extended-stay brands Candlewood and Staybridge Suites outperformed in the U.S.
market, according to IHG. As a result, the hotel company will bolster this segment with a new brand
called Atwell and expects the first property to open in Miami during the first
quarter of 2022, with additional properties throughout the U.S. later this
year. 

As “discretionary” business travel comes back to
the market—ostensibly in larger-market companies that pulled back during
the pandemic—IHG sees a new kind of business travel influenced by hybrid work
configurations. The company is looking at new ways to capture this business as
well, even if it appears to stray from IHG’s traditional focus.  

“First and foremost, our brands are about offering
guests a great stay experience,” said Barr. “But we do see that as
hybrid working evolves and office space shrinks, there’s going to be more
demand for co-working space. … People are going to want to find those welcoming
spaces where they can easily connect with others.” 

Barr said IHG is contemplating these needs as it makes
strategic brand decisions. Crowne Plaza Workspaces and Holiday Inn open lobby are
the company’s early plays for the co-working market. “We now have open
lobby installed or committed in almost our entire [Holiday Inn] estate in
Europe,” said Barr, noting that such hotels had seen an uplift in guest satisfaction
and food and beverage sales. He also said the new Atwell brand would
contemplate similar requirements for this developing market.

Barr
observed changes in groups and meetings business since business travel was
locked down. As the market comes back in Q2, Q3 and Q4, after stalling in
January due to the Covid-19 omicron variant, Barr predicts a leisure element
will influence the segment and IHG will aim to serve those business travelers
looking to blend work with pleasure.

Barr relayed an anecdote about a company booking a 3,000-person
partner meeting in Europe for three days, after which the host company planned
to pay for everyone to have an extra day for leisure. “It’s an interesting
dynamic there. Is that a work trip or is it leisure trip? It’s a bit of both,
but I think you’re going to see more of that,” he said. He cited the hybrid
work environment for driving a more leisure feel around business travel as
well. 

Q4 & Full Year 2021 Performance Metrics

Fourth quarter 2021 revenue per available room saw a 71
percent increase over the same period in 2020 and a decrease of 17.1 percent
for same period in 2019. Full year 2021 RevPAR increased 46 percent over the
same period in 2020 but decreased 29.8 percent over the same period in 2019. 

Occupancy was 56 percent for the fourth quarter 2021 and 53
percent for full year 2021.  In the U.S.,
occupancy reached 61 percent in both the fourth quarter and full year 2021.
Overall, fourth quarter 2021 occupancy increased 14.5 percentage points over
the same period in 2020 but decreased by 11 percentage points in the same
period in 2019. In full year 2021, occupancy increased 12.7 percentage points
over the same period in 2020 but decreased by 16.5 percentage points over the
same period in 2019. 

Average daily rate for fourth quarter 2021 increased 26.7
percent over the same period in 2020 and decreased by less than 1 percent for
the same period in 2019. For full year 2021, ADR increased 10.6 percent over
the same period in 2020 and decreased by 8 percent for the same period in 2019.

IHG’s Pipeline

IHG reported significant acceleration in signings in fourth
quarter 2021; at 23,700, these were close to levels achieved in 2019, with the
strongest increase in EMEAA. The global pipeline is now 271,000 in 1,797
hotels. According Barr, “Development activity was well ahead of 2020, with 437
hotel signings contributing to a global pipeline that represents more than 30 percent
of today’s system size. 

Overall IHG opened 44,000 rooms in 291 hotels over full year
2021, a 12 percent increase over 2020, even with an exit of 108 Crowne Plaza
and Holiday Inn properties. IHG’s global estate now stands at 880,000 rooms in
5,991 hotels.