InterContinental Earnings: Leisure Demand Continues as China, Group, and Business Travel Recover

Narrow-moat InterContinental's first-quarter sales update points to continued resiliency of travel demand, echoing results from the peer group in recent days. Leisure demand is enduring, with room revenue up 30% in the first quarter and at 125% of 2019's level. But the recovery is now being led by business and group, which saw sales growth of more than 30%, with the former back to 2019's level and the latter at 88% of prepandemic marks. Geographically, Greater China is seeing a strong rebound in domestic travel, resulting in its revenue per available room, or revPAR, jumping 75%, representing 91% of 2019's level, a strong lift from the roughly 60% mark in the fourth quarter. Meanwhile, IH's largest market, the United States, posted revPAR at 110% of 2019's level, in line with the fourth quarter. IH is not seeing any signs of demand weakening, and we think China will continue to recover in 2023, as flight capacity gradually returns. As a result, we don't plan to materially change our 2023 6% revPAR growth forecast or our $71 per share fair value estimate.