Last 12 months was a turning point for the hotel industry as things finally returned to normal, that’s pre-COVID levels, after a three-year drought. InterContinental Hotels Group (NYSE:IHG) is testament to that, because it issued its 2023 review that showed strong growth across its portfolio of hotels.

InterContinental Hotels Group, commonly known as IHG, saw its share price rise 60% in 2023 and this 12 months, it’s already up about 17% to over $107 per share. That is just not only a 52-week high for the stock, but an all-time high. Investors could also be wondering if it remains to be a buy after this recent surge. Let’s take a better look.

A powerful 2023

IHG’s year-end review, released Tuesday, included some impressive results, as revenue spiked 19% for the 12 months to $4.6 billion and operating profit rose 70% to $1.1 billion. It was the primary time that the corporate posted annual operating profit over $1 billion inside its reportable segments.

As well as, IHG also performed well in the important thing metrics that the industry watches closely – revenue per available room, or RevPAR, average every day rate, and occupancy rates. RevPAR was up 16% in 2023, and it was 11% higher than the 2019 peak. The typical every day rate was 5% higher than 2022, and up 13% from 2019, while occupancy climbed 6.4% in 2023. Occupancy was the one metric still below 2019 levels, about 1% lower, although significantly higher rates pushed the RevPAR higher.

The best gains got here in China and the EMEA (Europe, Middle East, and Africa), where RevPAR rose 24% and 72%, respectively. Within the Americas it climbed 7% year-over-year.

As well as, the portfolio grew with 275 recent hotels opened in 2023, with 27% of them coming within the fourth quarter with the addition of Iberostar hotels into the IHG portfolio. Overall, there was a net gain of three.8% when it comes to the full variety of rooms opened in 2023. As of Dec. 31, the chain had greater than 946,000 rooms in 6,363 hotels, with 66% within the midscale segments and 34% in upscale and luxury segments. The midscale area was bolstered by the launch of the Garner brand of hotels within the U.S. in September of 2023.

IHG’s strong performance helped it improve its financials and, in turn, reward shareholders. Its net money from operating activities climbed 38% to $893 million and its adjusted free money flow rose 45% to $819 million. This allowed IHG to return $1 billion to shareholders in 2023, with $750 million in share buybacks and $245 million in dividends distributed.

That may proceed in 2024, as the corporate announced plans to return $800 million to shareholders this 12 months in share repurchases, in addition to one other $200 million-plus in dividend payouts. Share repurchases typically have the effect of not only buying out shareholders who need to money out, but it surely helps the stock price as shares are typically price more when there are fewer available on the market.

Bullish outlook

IHG CEO Elie Maalouf stays bullish on the corporate, and the industry, this 12 months and over the subsequent few. By way of industry growth, he said hotel revenue has grown faster than the worldwide GDP in 19 of the 23 years since 2000.

Also, he cited research by Oxford Economics that forecasts a compound annual room night growth rate for the industry of 4% through 2033. The U.S. growth rate alone is targeted at 2.7%, while China is at 4.2%. This must be assisted by an additional recovery in occupancy levels for business travel and meetings and events; increased international flight capability; and the potential for room rate increases driven by higher demand.

“The travel industry has attractive, long-term drivers of demand, and the strength of our brand portfolio and enterprise platform will proceed to spice up our RevPAR and system size growth. Combined with our scale and price base efficiencies, it will further expand fee margin. IHG’s strong money generation supports investment in growth initiatives, sustainably increasing our peculiar dividend and the regular return of surplus capital similar to through buybacks,” Malouf said within the earnings release.

Is IHG a buy?

As for IHG’s outlook specifically, the corporate has greater than 2,000 hotels in the event pipeline, with 40% of them under construction. The pipeline represents one other 300,000 hotel rooms.

Further, it anticipates high-single digit percentage growth in fee revenue annually, on average, over the medium- to long-term, with fee margin expansion of 100 to 150 basis points annually, on average, in that period. Also, the corporate anticipates compound growth in adjusted EPS of 12% to fifteen% annually, on average, over the medium- to long-term.

The stock remains to be pretty reasonably valued, even with this surge in price, with a forward price-to-earnings ratio of 24 and a five-year P/E-to-growth (PEG) ratio of 1. With its momentum and outlook, backed by robust travel industry tailwinds, together with solid financials, IHG looks like a fairly solid long-term option. But given this rally, it is likely to be prudent to observe things and search for a dip after this all-time high.