Holiday Inn owner InterContinental Hotels Group plc displayed mixed financial results in the first quarter, according to Barclays, though shares appear cheaper than the competition.
While the Holiday Inn owner's revenue per available room (RevPAR) slightly missed expectations, strategic adjustments in system fund arrangements are set to bolster financial performance significantly.
In the first quarter, IHG posted a 2.6% year-on-year increase in RevPAR, marginally below the Barclays forecast of 2.8% and consensus estimates of 2.9%.
Net system growth stood at 3.4%, slightly higher than the 3.2% growth excluding contributions from Iberostar.
The quarter saw IHG signing 17.7 thousand rooms, aligning with Barclays' expectations but showing a slowdown from previous quarters. Room openings also decreased to 6.2 thousand from 8.4 thousand in the same quarter last year, reflecting typical seasonal adjustments.
However, significant changes to IHG's System Fund arrangements, which improve owner economics and grow ancillary fee streams, are expected to add approximately $25 million to both revenue and EBIT in 2024, with an additional $25 million expected by 2025.
Barclays noted that the hotel group trades at a lower Enterprise Value-to-EBITDA multiple of 15.6x for 2024 compared to its peers Hilton and Marriott, which stand at 17.1x and 16.1x respectively.
Barclays has a 12-month price target of 8,400p against a 7,722p publication price.