InterContinental Hotels Group PLC

IHG's primary focus on its management and franchising business model results in a fairly variable cost structure that helps to preserve margins and cash flow in a downturn. Furthermore, about 68% of IHG's hotels are in the upper-midscale and midscale segment, which proved resilient during the pandemic. In general, we consider that IHG has a stronger weighting to more-resilient midscale segments than peers do, and its business compares favorably to many other rated leisure companies. IHG also has low capital investment needs because hotel franchise agreements typically stipulate that existing and prospective franchisees are responsible for covering the operating costs of the hotels in their system. As of 2019, about 45% of IHG's demand in the U.S. came from business

...Our long-term view of IHG's business strengths remains positive. IHG benefits from its considerable scale of operations, wide geographic spread of revenue, portfolio of brands that target multiple price points, and favorable brand recognition. This typically results in a high S&P Global Ratings-adjusted EBITDA margin of about 50%, although margins dropped significantly to 28% in 2020 during the pandemic. However, we note that the company's presence in multiple price segments, brand diversity, and asset-light model provide resilience. We therefore expect a rebound in credit metrics in 2021, a year we see as transitionary for the sector, and a gradual and smoother recovery in credit metrics in 2022. IHG's primary focus on its management and franchising business model results in a fairly variable cost structure that helps to preserve margins and cash flow in a downturn. Furthermore, about 68% of IHG's hotels are in the upper-midscale and midscale segment, which proved resilient during the...

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