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IHG Downplays Stalled Growth Amid Pandemic Recovery

Article by SKIFT October 22, 2021

IHG isn’t expanding at the rate of some of its competitors. The company’s review process of poorly performing Holiday Inn and Crowne Plaza properties can’t end soon enough.

IHG Hotels & Resorts reported Friday its third straight quarter of essentially no net expansion to its global portfolio. But one company leader emphasized growth is just around the corner.

The company behind brands like InterContinental and Holiday Inn is still opening rooms — nearly 30,000 so far this year — but enough hotels are exiting the IHG network where the company hasn’t seen any annual net growth in recent quarters. New room signings in IHG’s Americas region are roughly half of 2019 levels.

Leaders at IHG, which is undertaking a review process of roughly 200 underperforming Holiday Inn and Crowne Plaza hotels, maintain the company can return to the strong growth momentum seen before the pandemic.

“Remember that there is quite a long lead time for a deal to go from when an owner starts to get interested in doing a signing with us to actually getting ink on a page and a legal contract in place,” Paul Edgecliffe-Johnson, IHG’s chief financial officer, said Friday on an investor call.

“For quite an extended period of time, our owners have been focused on stabilizing their businesses, looking after their teams, etc. And it’ll take a while before that sort of normalizes. What we have seen, though, is very encouraging.”

There has been an increase in inquiries about franchise deals, he added. Potential owners have letters of intent for hotels and available property lined up, and a crucial part of the development equation — willing lenders at regional banks — is once again showing signs of life.

Edgecliffe-Johnson indicated the company should be back to the growth it saw in 2018, which was the strongest level of rooms expansion seen in a decade, as early as next year.

“The regional banks have been calling our owners more to say, ‘We are open for business. We want to lend on your project,’” Edgecliffe-Johnson said. “Again, that’s a good early indicator as to the [pace of] signing doubling in due course.”

While IHG has seen flat growth this year, some of its competitors are managing to expand during the pandemic. Hilton reported a 7 percent net rooms growth in the second quarter compared to IHG’s negligible net expansion.

Marriott International, which similar to IHG saw a chunk of its rooms removed from its system due to a failed deal with a Boston-based real estate trust, estimated on its second quarter report the year would end with as much as 3.5 percent rooms growth.

A Year to Rebuild

Part of IHG’s flat rooms growth is attributed to the company’s ongoing review of roughly 200 Holiday Inn and Crowne Plaza hotels with poor customer service ratings. More than 90 of those hotels have either already been removed from the IHG network or are in the process of leaving. Owners of more than 40 of the hotels committed to a property improvement plan.

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