Analyst Note| Dan Wasiolek |
InterContinental’s second-quarter revenue per available room, or revPAR, returned to 57% of 2019 levels, an improvement from the 49% printed three months earlier. This sequential lift compares with narrow-moat peers Marriott and Hilton, which saw revPAR expand to 56% and 62% of 2019 levels in the second quarter, respectively, up from 42% and 45% in the first quarter. The slower rebound was driven largely by transitory issues, such as relatively high exposure to Greater China (17% of rooms), which is recovering ahead of other regions and brings with it a lower average room rate. The firm also carries above average group and European exposures, which have been slower to rebound, but still should lift as demand broadens out into 2022. Encouragingly, IHG’s second-quarter U.S. (around mid-50% of rooms) revPAR reached 77% of 2019 levels, a strong showing compared with the 67% and low-60% at Hilton and Marriott, respectively. We may lower our IHG 2021 revPAR toward low-60s of 2019 versus high-60s but still expect a full recovery by 2023. With this offset by time value, we don’t expect a material change to our $60 fair value estimate, leaving shares slightly overvalued.