IHG: Future Returns Will Depend On Resilient Model Amid U.S. RevPAR Weakness

We modestly lift our fair value estimate for InterContinental Hotels Group to roughly $93.95 per share from about $93.92, as analysts point to a more resilient, fairly valued business model with superior earnings visibility and long term sector support, despite mixed U.S. RevPAR trends and only slight adjustments to growth, margins, and future valuation multiples.

Analyst Commentary

Recent Street research reflects a more balanced stance on InterContinental Hotels Group, with several upgrades and modest target tweaks signaling confidence in the company’s earnings resilience and cash generation, even as U.S. RevPAR trends remain a key source of tension in the valuation debate.

Bullish Takeaways

• Bullish analysts highlight IHG’s more resilient, asset light business model relative to some peers, arguing that operational efficiencies can offset softer RevPAR, supporting steadier earnings growth and visibility.
• Upward revisions to price targets, including the double upgrade to Overweight at JPMorgan, are tied to expectations of 20% potential upside as the market better recognizes IHG’s superior free cash flow conversion and disciplined capital allocation.
• With RevPAR expectations now rebased after a period of underperformance, bullish analysts see scope for a more constructive narrative, with execution on cost control and brand strength driving multiple support over the medium term.
• Despite pockets of demand weakness, long term sector dynamics, including constrained new supply and steady travel demand, are viewed as supportive of sustainable growth and justify premium valuation multiples for IHG.

Bearish Takeaways

• Bearish analysts retain more cautious ratings, pointing to a still elevated valuation relative to near term growth, and see limited upside from current levels even with modest target price increases.
• Disappointing U.S. RevPAR in 2025, a key driver for lodging stocks, continues to raise concerns about the pace of top line growth, particularly given IHG’s meaningful exposure to this market.
• Some see risk that the recent rerating already discounts improved execution and cost efficiencies, leaving the shares vulnerable if revenue trends fail to inflect as quickly as expected.
• Marginal target price reductions, even alongside positive long term sector views, underscore lingering uncertainty around the durability of demand in key geographies and the potential for further estimate cuts if macro conditions weaken.

What's in the News

• Plans to launch a new collection brand in the upscale to upper upscale premium segment in the coming months, initially targeting high quality independent hotels in the EMEAA region to broaden the company’s collection offer and owner value proposition (Key Developments).
• The new collection brand is designed to complement existing premium and luxury offerings, including voco, which has reached 225 open and pipeline hotels across more than 30 countries since 2018, and Vignette Collection, which already has 27 open and 41 pipeline properties and is tracking ahead of its 10 year growth target (Key Developments).
• IHG has completed a $700 million share buyback announced in February 2025, repurchasing a total of 6,103,359 shares, or 3.89 percent of share capital, including 2,303,359 shares bought between July 1 and October 23, 2025 for $275 million (Key Developments).
• Development opportunities are now available in the U.S. for Ruby Hotels, IHG’s 20th global brand and latest premium urban lifestyle collection, aimed at cost and style conscious travelers in city centers and positioned for flexible use across new build, conversion, and adaptive reuse projects (Key Developments).
• Ruby’s U.S. debut builds on its European footprint of 34 open or pipeline hotels, with a growth plan focused on major urban markets and standardized, high quality room offerings paired with locally crafted public spaces and 24/7 bar concepts (Key Developments).

Valuation Changes

• Fair Value Estimate: Risen slightly to approximately $93.95 per share from about $93.92, implying a marginal upward adjustment in intrinsic value.
• Discount Rate: Increased slightly to around 9.12 percent from roughly 9.06 percent, reflecting a modestly higher required return applied to future cash flows.
• Revenue Growth: Improved marginally, with the long term projection now at about negative 17.37 percent versus negative 17.38 percent previously. This indicates a very small reduction in expected contraction.
• Net Profit Margin: Risen slightly to roughly 34.60 percent from about 34.54 percent, signaling a modest enhancement in expected profitability.
• Future P/E: Increased modestly to about 24.9x from roughly 24.6x. This suggests a small uplift in the valuation multiple applied to forward earnings.