Revenge trips are over, even in China, says IHG CEO

Pent-up travel demand, which fueled the global travel recovery following the Covid-19 pandemic, is over, it said Intercontinental Hotels Group Elie Maalouf, CEO.

“People really started traveling at the end of 2020, when restrictions started to lift,” he said. “So we’ve put revenge trips behind us, even in China.”

The company’s latest quarterly update showed that travel demand remained strong through the close of the summer travel season.

“We believe we are in a sustainable place,” Maalouf said. “Our group and meeting bookings through 2024 and beyond are the strongest we’ve seen in a long time.”

“We are pleased with the demand we are seeing from travelers… and we hope it continues,” he added.

IHG’s third-quarter trading update, released Friday, showed the company’s revenue per available room, or “revpar,” rose 10.5% compared to the third quarter of 2022, and nearly 13 % more compared to the third quarter of 2019, which was before the pandemic.

This is despite a 3% drop in revpar, compared to 2019, in Greater China’s large cities, which are more reliant on international travelers.

Maalouf told CNBC that the lack of “air bridge” or flight capacity to China is below 50% of pre-pandemic levels, which is affecting the travel recovery in cities such as Beijing, Shanghai, Guangzhou and Shenzhen.

“But if you look at the country as a whole, travel, which in China is mainly domestic, has recovered well above 2019,” he said, adding that more than 80% of IHG’s business in China is in mid-sized cities. and smaller. .

Third-quarter occupancy levels at IHG hotels were 72%, just 1% below pre-pandemic levels, according to the quarterly update. But average room rates have risen well above 2019 levels: nearly 6% in Greater China, 15% in the Americas, and 24% in Europe, the Middle East and Africa (EMEA) and Asia.

But raising rates is barely keeping pace with inflation, Maalouf said.

“Room prices really haven’t exceeded inflation in any of our markets,” he said. “I think people’s willingness to travel is demonstrated by the fact that they are willing to pay.”

IHG opened 50 hotels, with about 7,700 rooms, from July to September, with net system growth of 4.7% year-on-year; This includes the company’s strategic alliance with Spanish-owned Iberostar Hotels & Resorts, according to the business update. .

The company currently operates more than 6,200 hotels worldwide and has another 1,978 in the pipeline.

“We’re really seeing growth across all of our brands, across all of our businesses and across all of our regions,” he said. But “middle-class population and GDP growth are moving further east… Southeast Asia, Central Asia, China. That’s why we are very committed to this region.”

Maalouf also touched on the launch of Garner, IHG’s newest brand that will be priced lower than Holiday Inn Express, the company’s largest brand with 3,131 hotels worldwide as of Sept. 30.

“In the United States, there are about 9,000 hotels that we think are interested in joining a system. It’s not that we’re going to have 9,000 hotels join us, but we think a large proportion will.”

Maalouf said the first Garner hotels will likely open by the end of the year in the United States.

The CEO disputed reports that IHG is establishing a Middle East regional headquarters in Saudi Arabia.

“Our regional headquarters for the Middle East is in Dubai, and will remain in Dubai,” he told CNBC.

He said the company recently opened an office in Riyadh, reflecting its expansion plans in the Kingdom. IHG operates 40 hotels in Saudi Arabia, including InterContinental, Crowne Plaza, Holiday Inn, Staybridge Suites and Voco hotels, with a further 36 hotels under development.

The war between Israel and Hamas could complicate ambitious tourism goals in Saudi Arabia and the United Arab Emirates, but Maalouf said IHG has not changed its long-term plans in the region.

“It is truly heartbreaking, tragic and distressing to see the loss of life that is occurring, and we hope that the hostilities will end very soon,” he said.

“We are monitoring the situation very closely. But we have also been in the region for generations and hope to remain engaged.”