IHG Hotels & Resorts: U.S. Domestic Demand Fuels Profit Growth Amid Macroeconomic Uncertainty

IHG Hotels & Resorts (IHG), the parent company of iconic brands like Holiday Inn and Avid Hotel, has positioned itself as a resilient player in the global hospitality sector, driven by its strong performance in U.S. domestic demand. In its Q1 2025 trading update, IHG reported a +3.5% RevPAR (revenue per available room) growth in the U.S., outpacing competitors like Marriott and Hilton, and signaling confidence in its ability to sustain profit growth despite broader economic volatility.

The U.S. Domestic Engine

The U.S. remains IHG’s largest and most critical market, accounting for over 95% of its domestic business and serving as a buffer against softening international travel demand. CEO Elie Maalouf emphasized this strategic advantage:
> "Our ability to capture demand across geographies and chain scales, as well as being heavily weighted to domestic stay occasions, are resilient strengths of our business."

This focus on domestic travelers has paid off. In Q1 2025, U.S. RevPAR growth outperformed the same period in 2024, which saw a -1.9% decline, and surpassed competitors’ results. The performance was driven by groups (+6%), business (+4%), and leisure (+2%) segments, with occupancy rising 0.7 percentage points to 63.4%.

Strategic Leverage: Mid-Market Brands and Conversions

IHG’s success stems from its mid-market franchise model, which caters to budget-conscious travelers. Brands like Holiday Inn, Avid Hotel, and extended-stay options (e.g., Staybridge Suites) have proven resilient in volatile economic conditions. These brands also benefit from IHG’s conversion strategy, where existing hotels are rebranded under IHG’s portfolio at lower costs than new builds. In Q1 2025, conversions accounted for 60% of hotel openings and 40% of organic signings, enabling rapid scale expansion.

The company’s pipeline growth reinforces this strategy. IHG added 4,500 rooms (42 hotels) in the Americas in Q1, including 12 Holiday Inn properties and 18 extended-stay hotels. This expansion aligns with its goal to capitalize on quick-to-market opportunities, reducing capital expenditure risks while boosting occupancy and RevPAR.

System Growth and Financial Resilience

IHG’s global system expanded by +7.1% year-on-year (YoY) in Q1, with 14,600 rooms (86 hotels) opened—more than double the same period in 2024. The Americas region alone saw a 30% YoY increase in U.S. room openings, with net system growth rising +1.3% after adjusting for the removal of 7,100 rooms tied to The Venetian Resort Las Vegas.

Financially, IHG’s $324 million share buyback (part of a $900 million program) reduced its share count by 1.9%, signaling confidence in its stock valuation. Despite a 13.5% year-to-date (YTD) decline in IHG’s share price, the company’s fee margins improved by 700 basis points since 2019, reflecting operational discipline and scale advantages.

Navigating Challenges

IHG is not immune to macroeconomic headwinds. The CEO noted softening forward indicators and a potential slight miss on the 2.3% consensus RevPAR growth for 2025. However, the company’s geographic diversification—including strong performances in EMEAA (+5.0% RevPAR) and a rebounding pipeline in Greater China—mitigates risks. Additionally, domestic demand’s 95% contribution to U.S. revenue reduces reliance on volatile international travel.

Conclusion: A Resilient Growth Story

IHG’s Q1 2025 results underscore its strategic focus on U.S. domestic demand, mid-market brands, and cost-effective conversions as key drivers of profit growth. With a +9.4% YoY pipeline expansion, a robust $1.32 billion core earnings forecast for 2025, and a financial discipline that includes share buybacks and margin improvements, IHG is well-positioned to outperform peers.

While short-term headwinds like soft economic data and share price volatility persist, IHG’s domestic-heavy portfolio, diversified geographic exposure, and scalable conversion model provide a sturdy foundation for long-term growth. As CEO Maalouf noted, "We remain on track to meet full-year consensus profit expectations," a confidence backed by data: U.S. RevPAR grew +3.5% in Q1, outpacing competitors, and its global system now spans 987,000 rooms across 6,668 hotels. For investors, IHG’s resilience in an uncertain landscape—and its dominance in the U.S. mid-market—makes it a compelling play on the hospitality sector’s recovery.