ii view: City likes InterContinental Hotels numbers

First-quarter trading update to 31 March

• Total Revenue Per Available Room (RevPAR) up 4.4%
• Americas RevPAR up 3.6%
• Europe, Middle East, Africa & Asia (EMEAA) RevPAR up 5.6%
• Greater China RevPAR up 5.7%
• Completed $240 million (£178 million) of 2026's $950 million share buyback programme

Guidance:

• Management’s confidence in achieving full-year consensus growth forecasts and profit expectations is underpinned by the strength of the group’s performance year-to-date

Chief executive Elie Maalouf said:

"With thanks to our teams we delivered a very strong Q1 trading performance, benefiting from our diverse global footprint and better than expected demand in most regions around the world.

“Looking ahead, our comparable on-the-books global revenue for Q2 indicates continued growth, with the impact of the Middle East conflict and some wider disruption to international travel flows expected to be more than offset by increases in demand elsewhere.”

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ii round-up:

InterContinental Hotels Group (LSE:IHG) is one of the world's largest hoteliers. The FTSE 100 company has more than one million rooms across 7,000 open hotels in more than 100 countries.

Its portfolio of 21 hotel brand names, ranging from budget to luxury names, include InterContinental, Holiday Inn, Crowne Plaza and Kimpton.

For a round-up of this latest trading update announced on 7 May, please click here.

ii view:

Headquartered in Buckinghamshire, the company employs around 400,000 people globally. Other group brands include Six Senses, Regent and Candlewood. Geographically, the US generated most revenues in its last financial year at 38%, with the UK at 6%. Group focus includes expanding key geographic markets, developing its technology and enterprise platform, as well as driving ancillary fee streams such as its customer rewards loyalty programme.  

For investors, a war in the Middle East now hinders sales at the group’s EMEAA region. Elevated energy prices now potentially put pressure on spending by both companies and consumers. They also add to the group’s own expenses including now higher employee taxes in the UK, while the use of video meetings,  heightened during the pandemic, now likely replace some business travel.  

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On the upside, latest quarterly RevPAR growth of 3.4% in its key US market is up from a decline of 2% in the prior fourth quarter, with the trend in China improving to growth of 5.7% from 1.1% in Q4. Geographical and brand diversity are high. The business model is asset light with other organisations usually owning the properties and IHG charging fees to operate and run under its hotel brands. A sizeable pipeline of potential future hotels exists, while shareholder returns focus on both share buybacks and a forecast dividend yield of around 1.3%.

For now, and despite risks, largely improving geographic trends, management confidence in the current financial year and the football World Cup in North America this summer are all likely to keep investors firmly supportive.

Positives:

• Brand and geographical diversity
• Focus on shareholder returns

Negatives:

• Uncertain economic outlook
• Heightened global geopolitical tensions

The average rating of stock market analysts:

Strong hold