Intercontinental Hotels Group PLC (LSE:IHG) is Jefferies’s “preferred play on the travel recovery,” as the bank believes it is in a good position to pressure rivals and market leader Marriot International Inc.
The FTSE 100-listed hotel group trades at a significant discount to Marriot but the US bank believes IHG is “better positioned for growth and defensibility this year,” citing exposure in Asia, unit growth and downtrading.
“IHG is better exposed to the travel recovery through Asia. We estimate Asia (including China) is 30% of rooms and 24% of sales for IHG vs 10% of sales for Marriott,” said Jefferies.
The British multinational, which owns chains including Holiday Inn, Avid, Kimpton and Six Senses, is also better equipped for net unit growth in Asia, with the continent making up half of its pipeline compared to 30% for Marriot, the bank added.
IHG’s net growth “lagged” its US rival during the pandemic, but Jefferies believes the gap should narrow this year.
The company’s access to “upper midscale segment” is significantly stronger than Marriot’s, with Holiday Inn and its Express sub-brand making up 62% of IHG rooms.
Noting that around half of Marriot rooms are premium or luxury, Jefferies said “midscale tends to outperform luxury brands in a downturn”.
Marriot is trading at US$168.72, up 14% in 2023, compared to IHG which trades at £56.62, up 17% in the same period.