InterContinental Hotels Group Reports 3.3% RevPAR Growth in Q1 Amid Regional Divergences

InterContinental Hotels Group (IHG) has delivered a mixed performance in its Q1 2025 trading update, with global RevPAR rising 3.3% year-on-year, driven by robust demand in key regions. While this reflects operational resilience, regional disparities and macroeconomic headwinds highlight the complexity of IHG’s path to sustained growth.

Regional Performance: Strengths and Weaknesses

IHG’s results were uneven across geographies, with EMEAA (Europe, Middle East, Africa, and Asia) leading the way with 5.0% RevPAR growth, outperforming the Americas (+3.5%) and contrasting sharply with Greater China (-3.5%). The decline in China stems from tough prior-year comparatives and increased outbound leisure travel, though IHG remains optimistic about stabilization in this critical market.

The leisure segment grew by 2%, while groups saw a stronger 5% rise, signaling pent-up demand for corporate and event travel. Business travel, a traditional pillar, expanded by 3%, underscoring the sector’s gradual recovery post-pandemic.

Operational Momentum and System Expansion

IHG’s system expansion is a standout success. Gross system size grew by 7.1% year-on-year, with 14,600 rooms (86 hotels) opened in Q1—more than double the pace of the same period in 2024. The global pipeline now totals 334,000 rooms (2,265 hotels), a 9.4% year-on-year increase, fueled by the February acquisition of the Ruby brand, which contributed 5,700 rooms to signings. Conversions to IHG brands now account for 60% of openings, highlighting the appeal of its platform for independent hotels seeking scale.

Financial Strategy and Shareholder Returns

IHG’s financial discipline remains intact. The company has utilized $324 million of its $900 million 2025 share buyback program, reducing shares outstanding by 1.9%. Combined with a 10% dividend hike, this prioritizes shareholder returns even as the company grapples with rising costs, including “key money” fees for securing management agreements. CEO Elie Maalouf emphasized confidence in meeting full-year profit targets, citing domestic demand strength and geographic diversification as key buffers against macroeconomic risks.

Challenges Ahead

Despite the positives, IHG faces hurdles. The -3.5% RevPAR decline in Greater China remains a concern, while Europe’s Q1 performance, though not detailed, is likely softer due to economic uncertainty. Spark (TipRanks’ AI) rated IHG stock as Neutral, citing high leverage and negative equity, alongside bearish technical indicators.

Conclusion: A Balanced Outlook for IHG

IHG’s Q1 results underscore its ability to navigate a fragmented recovery. The 3.3% RevPAR growth, robust pipeline expansion, and disciplined capital allocation provide a solid foundation for long-term growth. However, investors must weigh these positives against near-term risks:
- Regional volatility: Greater China’s recovery and Europe’s demand remain uncertain.
- Cost pressures: Rising “key money” fees and interest rates could squeeze margins further.
- Valuation: With a market cap of £13.04 billion and a P/E ratio of 47.67, IHG’s stock may be overvalued relative to its earnings trajectory.

IHG’s 9.4% pipeline growth and 60% conversion rate suggest strong execution in scaling its brands, particularly through the Ruby acquisition. If the company can stabilize performance in China and Europe while managing costs, its 12–15% annual EPS growth target becomes achievable. For now, IHG’s resilience in a challenging environment positions it as a mid-tier investment, offering growth potential but requiring close monitoring of macroeconomic trends.

Investors should track IHG’s Q2 results on August 6 for further clarity on demand trends and margin dynamics. While the stock’s 13.78% drop over four days post-earnings reflects short-term concerns, IHG’s diversified portfolio and strategic moves make it a compelling play on the global hotel recovery—if risks materialize, however, the downside could test shareholder patience.