The chief of Holiday Inn owner InterContinental Hotels Group has warned that the UK stock market is “not a very attractive place” for listed companies and called on authorities to get on the “front foot” to arrest further decline.
Several shareholders in the group, which has been listed in London since it demerged from pubs business Mitchells & Butlers two decades ago, asked at an investor roadshow last month whether it had any plans to switch its primary listing to the US, IHG chief executive Keith Barr told the Financial Times. The group has a secondary listing in New York.
“When we listed, there was probably no reason to even think about listing in the US for our primary listing because the FTSE was the FTSE and it was incredibly liquid but things have changed,” said Barr.
Decisions by several large companies to shun the City in favour of New York have sparked fears about the future of the London stock market.
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Last month CRH, the world’s biggest building materials group, said it would relist in New York and Cambridge-based chip designer, Arm, shunned a secondary London listing despite pleas from the UK government. Flutter, the world’s largest listed gambling company, is awaiting the result of a shareholder vote about a secondary US listing, with an eye to switching its primary listing in future.
Although there are specific reasons in each case, the deeper pool of capital in the US is a huge draw for groups looking for growth.
“The general consensus is [London’s] not a very attractive place to list new companies versus other markets,” said Barr. He argued the FTSE needed to tempt back investment from pension and insurance funds to improve liquidity and ease governance rules compared with the US.
London’s stock market “hasn’t been on its front foot for a little while and needs to find its way back there”, he added.
Although more than half of IHG’s revenues come from the US, Barr still defended the merits of the UK, saying it “is still a great location to be based out of” for an international company. IHG is headquartered in Windsor, 30 miles west of the capital.
He also stressed that “there’s no clamouring” for a switch in listing from shareholders and management was “not currently considering” the matter, but acknowledged “that could change at some point in the future”.
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His comments came as the travel sector continues its recovery from the pandemic. Despite fears that an economic slowdown would undermine the rebound, Barr insisted that “no one’s seeing any cracks in travel right now”.
“We’ve been talking about entering a recession since last August and it’s constantly being said that maybe next quarter the recession is going to be here but it has not arrived,” he added.
Barr said IHG, the world’s fourth-biggest hotel group by sales with a market capitalisation of £9.2 billion, faced a smaller valuation gap compared with its US rivals, Hilton and Marriott, in comparison with other London-listed sectors, thanks to a rebound in travel boosting its performance.
IHG, which owns 18 brands including Crowne Plaza and Regent Hotels, reported revenues of $3.9 billion in 2022, up 33 per cent on the year before but still down on sales of $4.6 billion in 2019.
Barr said IHG’s push into the luxury segment would help fuel its recovery. Luxury and “lifestyle” hotels account for 13 per cent of IHG’s rooms but 20 per cent of its pipeline comes from this segment.
“There’s going to be a lot more partnerships and a lot more small M and A happening, particularly as [smaller operators] realise how difficult it is to grow particularly in a higher interest rate environment,” he said. – The Financial Times
