InterContinental Hotels: Navigating U.S. Demand Concerns While Delivering Attractive Growth at a Reasonable Price

InterContinental Hotels Group (IHG) has long been a bellwether for global hospitality trends, and its 2025 performance underscores both the challenges and opportunities facing the sector. Despite macroeconomic headwinds in the U.S., IHG’s strategic agility, asset-light model, and global diversification position it as a compelling investment opportunity. This analysis examines IHG’s valuation metrics, U.S. market dynamics, and long-term growth potential in a high-uncertainty environment.

Financial Performance: Strong EBITDA Growth, Mixed U.S. Prospects

IHG reported robust financial results for Q2 2025, with total revenue reaching $2,519 million—a 8% year-over-year increase—and adjusted EBITDA growing by 10% to $1,259 million [1]. Operating profit from reportable segments surged 13% to $604 million, reflecting disciplined cost management and pricing power. However, U.S. RevPAR growth slowed to 1.4% in Q2 2025, driven by a 0.1 percentage point rise in occupancy and a 1.3% increase in average daily rate [2]. This lagging performance contrasts with global RevPAR growth of 1.8%, as Greater China and other regions faced declines [1].

The U.S. market, IHG’s largest revenue driver, is grappling with inflationary pressures, elevated interest rates, and shifting consumer preferences. According to a report by PwC, U.S. RevPAR growth is projected to decelerate to 0.8% in 2025, with luxury hotels outperforming economy segments due to resilient high-income demand [3]. IHG’s U.S. RevPAR dipped 0.9% in Q2 2025 amid these macroeconomic headwinds [4], yet the company’s global net rooms expanded by 4.1% year-over-year, reaching 968,000 rooms across 6,505 hotels [5].

Valuation Metrics: A Premium Stock in a Discounted Sector?

IHG’s valuation appears elevated relative to industry peers. As of August 2025, its trailing P/E ratio stands at 24.51, significantly higher than the industry average of 14.18 but lower than Hilton’s 40.14 and Marriott’s 29.62 [6]. The company’s P/EBITDA ratio of 25.73 also exceeds the U.S. hotel industry average of 14.18 [7], suggesting it trades at a premium. However, this premium may reflect IHG’s stronger balance sheet and growth prospects.

IHG’s enterprise value of $21.81 billion and TTM EBITDA of $1.372 billion yield an EV/EBITDA ratio of 18.7x [8], which is high compared to the industry average of 10.27x [9]. This discrepancy highlights the tension between IHG’s operational strength and macroeconomic uncertainties. While the U.S. market faces margin compression from rising labor costs and occupancy declines [10], IHG’s global expansion—particularly in high-growth markets like India and the UAE—offsets domestic volatility [11].

Long-Term Growth: Diversification and Strategic Acquisitions

IHG’s asset-light model and geographic diversification are critical to its long-term resilience. The company added 207 hotels in H1 2025, with 5.4% net system growth, and its pipeline expanded by 12% to 327,000 rooms [1]. Strategic acquisitions, such as the niche Ruby brand, further position IHG to capture evolving consumer preferences [11]. Analysts project IHG’s EPS to grow at 13.9% annually through 2026, driven by cost efficiencies and rate increases [12].

Despite U.S. challenges, IHG’s global RevPAR is forecast to grow 1.7% in 2025, with modest expansion expected thereafter [13]. The company’s focus on luxury and midscale segments—where demand remains robust—provides a buffer against weaker economy-tier performance [3]. Moreover, IHG’s stock is projected to reach $128.18 by October 2025, offering a potential 13.72% return on investment [14].

Conclusion: A Reasonable Price in a Volatile Sector

InterContinental Hotels Group’s valuation may appear elevated at first glance, but its operational performance, global diversification, and strategic adaptability justify the premium. While U.S. demand concerns persist, IHG’s expansion into high-growth markets and asset-light model insulate it from domestic volatility. For investors seeking long-term growth in a high-uncertainty environment, IHG offers a compelling blend of resilience and value.

Source:
[1] InterContinental Hotels Group (IHG) Half Year Results for the 6 months to 30 June 2025 [https://www.ihgplc.com/en/news-and-media/news-releases/2025/half-year-results-for-the-year-to-30-june-2025]
[2] IHG Projects Growing Corp. Demand After Solid Q3 [https://www.businesstravelnews.com/Procurement/IHG-Projects-Growing-Corp-Demand-After-Solid-Q3]
[3] US Hospitality Directions: May 2025 [https://www.pwc.com/us/en/industries/consumer-markets/hospitality-leisure/us-hospitality-directions.html]
[4] IHG's U.S. Revenue Decline: A Barometer for Hotel REIT Resilience in Volatile Recovery [https://www.ainvest.com/news/ihg-revenue-decline-barometer-hotel-reit-resilience-volatile-recovery-2508/]
[5] IHG reports 1.8% RevPAR gain for first half 2025 [https://www.hotelinvestmenttoday.com/Financials/C-Corps/IHG-reports-RevPAR-gain-of-1-8-for-first-half-2025]
[6] InterContinental Hotels Group PLC - PE Ratio [https://www.wisesheets.io/pe-ratio/IHG]
[7] Enterprise Value Multiples by Sector (US) [https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/vebitda.html]
[8] InterContinental Hotels Group (NYSE:IHG) Stock Valuation [https://simplywall.st/stocks/us/consumer-services/nyse-ihg/intercontinental-hotels-group/valuation]
[9] IHG InterContinental Hotels Group PLC Valuation Measures [https://seekingalpha.com/symbol/IHG/valuation/metrics]
[10] US hotel growth forecast downgraded — again [https://www.hoteldive.com/news/hotel-growth-forecast-downgraded/757285/]
[11] IHG: Q3 Trading Update to 30 September 2024 [https://www.hotel-online.com/press_releases/release/ihg-q3-trading-update-to-30-september-2024]
[12] InterContinental Hotels Group Future Growth [https://simplywall.st/stocks/us/consumer-services/nyse-ihg/intercontinental-hotels-group/future]
[13] InterContinental Hotels: Attractive Growth At A Reasonable Price [https://seekingalpha.com/article/4790179-intercontinental-hotels-attractive-growth-at-reasonable-price]
[14] InterContinental Hotels Group PLC (IHG) Stock Forecast & Price Prediction [https://coincodex.com/stock/IHG/price-prediction/]