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.

Terri Hardin  www.businesstravelnews.com