From Breakingviews - Hotels share revival shrugs off two crises
its operating profit from reportable segments soared 55% to $828 million in 2022 thanks to a revival in the U.S. market, customers taking longer holidays and its ability to hike prices. Chief Executive Keith Barr reckons the year ahead will continue to see strong demand, boosted by China’s re-opening.
Investors appear to believe him: InterContinental is only finally set to exceed 2019’s revenue this year, with analysts pencilling in sales of $2.2 billion, according to Refinitiv. Yet its share price is 18% above its pre-pandemic levels. To deliver on such optimism, the group will need to keep drawing punters to its high-priced rooms even as the cost of living crisis and higher interest rates bite in the U.S. and Europe. Revenue per available room, a key pricing metric, rose 37% last year.
Then there’s China. In 2019, the People’s Republic accounted for around 10% of the hotel market, and its citizens spent over $250 billion on international tourism, according to the World Tourism Organisation. Yet Covid-19 may still hurt spending in the Middle kingdom, and geopolitical tensions may lead to fewer Chinese people travelling. Investors are betting that hotels can be as safe as houses.
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