‘We want more of both’: IHG strengthens pipeline of new-builds and conversions

The chief executive of InterContinental Hotels Group (IHG) has revealed the hotel group is looking at both conversions and new-build opportunities to accelerate growth.

 

It comes after conversions represented more than half of all signings in its H1 2024 results, while new-build signings were up 8% compared to last year (up 23% on a number of rooms basis), reflecting improvements in developer confidence.

 

The group launched its midscale conversion-friendly brand Garner in the United States a year ago, which it said “has considerable opportunity to reach substantial scale”.

 

Since the initial announcement, there have been over 80 Garner property signings across Germany, Japan, Austria, Turkey and the UK, with a target of 1,000 hotels globally over the next 20 years.

 

IHG said its roster of conversion-focused brands – Voco, Vignette and Garner – account for over a quarter of conversions, though its Holiday Inn and Holiday Inn Express brands still represent over 40% of conversions since 2020.

 

The group added: “Conversions continue to rise in importance globally and present an increasing share of systems growth. Conversion signings increased from 17% of hotels signed in 2017 to 36% in 2023.”

 

During a call to investors, Elie Maalouf said: “While we are not yet at the levels of new-build signings of pre-pandemic, it is improving gradually. We hope that trend continues and lower interest rate favours that. We want more of both [conversions and new-builds]; we’re not targeting a percentage of either.”

 

Net system growth year-on-year was up 3.2%, boosted by 126 new hotels in H1 and 384 properties signed in H1, amounting to a 67% increase.

 

Global RevPAR during the period was also up 3%, while EMEAA RevPar growth was up 6.3% in Q2, following an 8.9% boost in Q1.

 

IHG also exited 9,000 rooms in H1, which was equivalent to a 1.7% removal rate over the last 12 months.

 

When quizzed on this by investors and analysts, Maalouf re-iterated: “We’re comfortable with the 1.7% in the first half of the year. We always have more exits than in the second half of the year.”

 

He also pointed out IHG is “not seeing a trading down or a trading up trend yet that is discernible”.

 

“We’ve heard of other sectors talking about trading down, but we’re not seeing that yet.”

 

When asked about the possibility of acquiring other brands, Maalouf added: “We will create or acquire new brands if and when we see a strong consumer demand and owner demand to invest in a place of scale where we are not participating.

 

“We’ve added nine brands in the last nine years, which were not planned fully one for a year, but because we found opportunities, and that may happen again. Consumer tastes evolve and we’re always on the lookout.”

 

In terms of geographical expansion, the group is leaning into its operations in Japan, India, Germany and Saudi Arabia, which is its “second strongest signings market”.