InterContinental Hotels Group Reports Slowing Room Revenue Growth

(Reuters) – Holiday Inn owner InterContinental Hotels Group (IHG) reported a significant slowdown in room revenue growth for the third quarter, influenced by weak demand in China and a tepid U.S. market, despite solid performance in Europe.

Key Highlights:

• Revenue per Available Room (RevPAR):

  • Rose 1.5% in Q3 ended Sept. 30, down from 3.2% growth in the previous quarter.
  • Increased by 4.9% in Europe, the Middle East, Africa, and Asia, while in China, it fell by 10.3%, reflecting a decline from last year's strong domestic travel recovery.

• Stock Performance:

  • Shares dropped 1.8% to 8,412 pence early Tuesday, following a 20% rise this year due to increased demand and higher prices.

• Market Dynamics:

  • Customers are hesitating at higher prices as demand normalizes to pre-COVID levels, and in China, there has been a shift towards overseas travel in the Asia Pacific.

• Licensing Agreement:

  • The agreement with The Venetian Resort and The Palazzo in Las Vegas will end on Jan. 1, 2025, removing 7,092 rooms, or approximately 0.7% of IHG's system, from its portfolio.

• Future Expectations:

  • Analysts expect IHG to underperform compared to U.S. peers with a projected 1.5% RevPAR growth for Q3, which is considered low. Analyst Richard Clarke noted that management will need to strategize to increase RevPAR to around 3% in Q4.
  • The company anticipates aligning with market expectations for the end of 2024, with average analyst expectations of 2.6% RevPAR growth accumulated from consensus data.

• Net System Size Growth:

  • IHG's net system size grew by 4.1% in the third quarter, accounting for the number of newly opened rooms minus those that closed.