InterContinental Hotels Group (IHG), the owner of Holiday Inn, has reported a significant 19 per cent drop in revenue per available room (RevPAR) in the Middle East for the three months to June, as the ongoing Iran conflict disrupts regional tourism. This follows a two per cent decline in the previous quarter, according to the company's latest trading update.
Regional Growth Slows Sharply
The fallout from the conflict has also dampened the group's overall performance across its Europe, Middle East, and Asia (EMEA) region. Growth in this area slowed dramatically from 5.6 per cent in the first quarter of this year to just 0.6 per cent in the second quarter, reflecting the broader impact on international travel flows.
IHG, which also owns the Crowne Plaza and Vignette Collection brands, warned shareholders that it is dealing with "ongoing impacts from the Middle East conflict, including some wider disruption to international travel flows." However, the group emphasised that the Middle East accounts for just five per cent of its global market, and it remains confident that these effects will be offset by growth elsewhere.
CEO Highlights Resilience
Elie Maalouf, IHG's chief executive, underscored the strength of the company's diversified business model. "This demonstrates the strength of IHG's business model which is strategically diversified and resilient," he said.
Despite the regional setback, IHG reported a welcome trading boost from the FIFA World Cup this summer, which contributed one per cent revenue growth to its Americas performance in the second quarter. The US market has seen growth accelerate from 3.6 per cent in the first quarter to 5.4 per cent in the second, driven by supportive trading conditions and a stronger US economy.
Global Performance and Financials
In the three months to June, the FTSE 100 firm recorded revenue growth of 3.1 per cent in the UK, 2.3 per cent across continental Europe, and six per cent in East Asia and the Pacific. Total revenue for the year to June climbed seven per cent to $1.3bn (£928m), while pre-tax profit dipped nine per cent to $578m (£428m).
The group achieved record levels of new site development in the first half of the year, with nearly 200 hotel openings. IHG currently operates 7,100 hotels globally, with a further 2,400 in the pipeline, indicating strong future growth potential.
Investment in AI and Market Reaction
IHG also revealed significant investment in artificial intelligence, with gross costs rising eight per cent to $12m over the past three months. This increase is attributed to expanding use of AI in back-office functions, as well as across its websites and apps, as the company seeks to enhance operational efficiency and customer experience.
Shares in the group dropped 2.5 per cent to 151p in early trading, reflecting investor concerns over the Middle East impact, although the company's overall diversification strategy appears to be mitigating risks.
