ii view: InterContinental Hotels’ profits beat City forecasts

First-half results to 30 June

• Revenue up 8% to $2.52 billion
• Operating profit up 19% to $623 million
• Interim dividend up 10% to 58.6 US cents
• Group net debt up 21% to $3.36 billion 

Chief executive Elie Maalouf said: “Our momentum continued in the first half of 2025, with further achievements in accelerating the growth of our brands, expanding in key geographies, strengthening hotel-owner returns, driving ancillary fee streams, delivering cost efficiencies, and returning surplus capital to shareholders. 

“We remain on track to meet full-year consensus profit and earnings expectations. While some shorter-term macro-economic uncertainties remain, many are subsiding, and we are confident in the ongoing successful delivery of our growth algorithm.”

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ii round-up:

InterContinental Hotels Group (LSE:IHG) today reported sales and profits that beat City expectations, with the owner of brands including Holiday Inn and Crown Plaza flagging its prediction to meet full-year profit forecasts. 

First-half revenue growth of 8% to $2.52 billion (£1.8 billion) drove operating profit up 19% to $623 million. Analysts had expected outcomes of $2.49 billion and $595 million. The interim dividend of 58.6 US cents, and up 10% from a year ago, is payable to eligible shareholders on 2 October and adds to a continuing 2025 share buyback programme of $900 million.

Shares for the FTSE 100 company rose 5% in UK trading having come into this latest news down by just over a tenth so far in 2025. That’s similar to rivals Hyatt Hotels Corp Class A (NYSE:H) and Accor SA (EURONEXT:AC). The FTSE 100 index is up almost 11% year-to-date. 

InterContinental operates 20 global hotel brands from budget to luxury names across more than 100 countries. 

Cost efficiencies and additional or ancillary fees helped the fee margin improve almost 4% year-over-year to 64.7%. InterContinental charges fees to owners of properties to operate and run them under its hotel brands.

Additional or ancillary fee streams include the sale of loyalty points to consumers under the group’s One Rewards programme and co-branded credit card agreements.

The hotelier opened a record number of rooms during the half year with the addition of 207 hotels. Management signed another 324 properties into the company’s pipeline. 

Revenue per Available Room (RevPar) for the second quarter, a key industry metric, slowed to a gain of 0.3% from 3.3% in Q1. The metric for its core US market fell 0.9% from growth of 3.5% in Q1, overshadowed by proposed US trade tariffs’ tensions. China RevPar improved to a fall of 3% from a loss of 3.5% in Q1. 

A third-quarter trading update is scheduled for 23 October. 

ii view:

Headquartered in Buckinghamshire, group brands include Six Senses, Regent, Kimpton, Candlewood as well as InterContinental itself. Hotel numbers currently total over 6,700 outlets with the milestone of one million rooms having now been hit. Geographically, the Americas, including the US, generated most revenues during this latest period at 48%. That was followed by EMEAA (Europe, Middle East, Africa & Asia) at 31%, China at 6%, and a balance of 15% via head office. 

For investors, the still uncertain economic outlook and focus on US trade tariffs overshadows the firm. RevPar for its China business continues to fall, likely hindered by prior and ongoing economic challenges and a focus on property. Existing geopolitical tensions such as those impacting the Middle East could yet expand to other countries impacting customer demand, while video meetings now likely replace some former business travel.  

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To the upside, 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 an estimated future dividend yield of around 1.6%.

On balance, and despite continued risks, this global hotelier appears to remain worthy 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