IHG: no permanent Holiday Inn New York just yet

Hotel groups are used to customers requesting room changes if the views do not suit. Recently some InterContinental Hotels Group shareholders have enquired about a change of scenery for its primary listing, specifically to the US. 

IHG chief executive Keith Barr told the Financial Times that the answer was no, though that “could change at some point in the future”. Keeping an open mind is understandable.

Others prefer New York. Building materials group CRH seeks a change of digs there. Trading liquidity has diminished in London and its shares trade at a discount to peers. SoftBank rejected a London listing for its Cambridge-based chip designer Arm. Gambling group Flutter wants a secondary US listing, and may move its primary listing in future.

Barr hinted that greater liquidity stateside appeals. When IHG was created as a standalone group in 2003, FTSE 100 companies were “incredibly liquid . . . but things have changed”.

A US primary listing makes some sense for IHG. The Americas, led by the US, are the lion’s share of revenue and operating profit. Revenue per available room (revpar), the hospitality industry’s key metric, was 3.3 per cent higher last year in the Americas than in 2019, before pandemic lockdowns brought travel to a sudden halt.

The group behind the Holiday Inn and Crowne Plaza brands has more than 4,300 hotels in the Americas. The majority, 96 per cent, are run on a franchise model in line with IHG’s strategy of owning little and collecting fees.

IHG’s forward enterprise value to ebitda multiple of about 13 times is roughly in line with its five-year pre-Covid average. But this values the group at a discount to US peers operating similar “asset light” models. Marriott trades on more than 14 times and Hilton nearly 16 times, according to S&P Capital IQ.

Even so, that gap does not look huge. Barr will want to weigh up the costs of moving the primary listing against the benefits of pricier shares. The carpet is not always plusher in neighbouring rooms.