ii view: InterContinental Hotels makes robust start to 2025
Shares in this global hotelier have underperformed the FTSE 100 index so far this year but are on the rebound. Analyst Keith Bowman takes a look at prospects.
8th May 2025 15:42
by Keith Bowman from interactive investor
First-quarter trading update to 31 March
- Revenue per available room (RevPAR) up 3.3%
- Opened 86 hotels, more than double that of Q1 2024
- $324 million of 2025’s $900 million buyback programme completed
Chief executive Elie Maalouf said:
"We had strong trading performance and development activity for our world class brands in Q1, despite increased volatility in the macro environment.
“The outlook of attractive long-term structural growth drivers for both demand and supply remain unaltered for the travel industry and for IHG in particular.”
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ii round-up:
InterContinental Hotels Group (LSE:IHG) today detailed early year demand ahead of City forecasts, with the global hotelier confident that it is on track to meet full-year profit forecasts.
Growth in first quarter Revenue per Available Room (RevPar), a key industry metric, of 3.3%, exceeded analyst estimates of 2.4%, with IHG having opened 14,600 rooms, or 86 hotels during the quarter, more than double that opened in early 2024.
Shares in the FTSE 100 company rose 2% in UK trading having come into this latest news down by just over a tenth year to date. That’s similar to Premier Inn operator Whitbread (LSE:WTB). The FTSE 100 index is up almost 4% in 2025.
InterContinental operates 20 global hotel brands from budget to luxury names and including Holiday Inn, Crown Plaza, Six Senses, and its most recently purchased ‘Ruby’ brand.
Growth in RevPar for its Europe, the Middle East, Asia, and Africa (EMEAA) region, accounting for almost a quarter of profits in 2024, led the way during the period, growing 5%.
Revenue on the same basis for its biggest Americas division, generating almost three-quarters of 2024 profit, improved 3.5%. That was up from 2.5% in 2024 but with March and April flagged as ‘flat’ by management given the timing of Easter.
RevPar for the remaining China business, accounting for under a tenth of 2024 profits, fell 3.5%, an improvement from a fall of 4.8% in 2024.
An acquisition adjusted 20,200 new rooms were signed during the quarter, up from 17,700 in Q1 2024. Just over $300 million of its previously announced $900 million 2025 share buyback programme has been executed so far.
First-half results to the 30 June are scheduled for 7 August.
ii view:
Headquartered in Buckinghamshire, InterContinental charges fees to owners of properties in order to operate and run them under its hotel brands. Hotel numbers currently total over 6,600 outlets across more than 100 countries with a developmental pipeline of over 2,200 properties.
For investors, a possible trade war between its two major markets, the US and China, could result in economic slowdowns, hindering customer bookings. RevPar for its China business continues to fall, likely hindered by prior and ongoing economic challenges and focused on property. Global geopolitical tensions such as those across the Middle East cannot be ignored, while China’s relationship with Russia and cooler friendship with the West also warrants consideration.
More favourably, geographical and brand diversity are high. New hotels continue to be signed and opened. An asset light business model is being pursued, while shareholder returns focus on both share buybacks and a forecast dividend yield of around 1.6%.
For now, and despite continued risks, this global hotelier looks to remain deserving of its place in many already diversified investor portfolios.
Positives:
- Brand and geographical diversity
- Focus on shareholder returns
Negatives:
- Uncertain economic outlook
- Heightened global geopolitical tensions
The average rating of stock market analysts:
Hold
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