Intercontinental Hotels Group PLC (LSE:IHG) shares got a boost from a Goldman Sachs upgrade on Wednesday while sector peer Whitbread PLC (LSE:WTB) went the other way after a downgrade.
The US investment bank upped its rating on Crown Plaza owner IHG to 'buy' from 'neutral', while downgrading Premier Inn parent Whitbread to 'neutral' from 'buy' as part of a note on the hotels sector.
For IHG, where its share price target was hiked to 9,350p, Goldman said the current share price offered "attractive entry-point into a high quality, asset-light hotel franchise platform".
The owner of the Holiday Inn, Six Senses, Kimpton, Voco and Avid hotel brands offered the potential for 15.1% earnings per share compound annual growth out to 2028, plus a 7% shareholder return per year via dividends and buybacks, and "one of the highest returns" returns on capital in the analysts' leisure coverage.
The Goldman analysts also highlighted a valuation gap between IHG and its US peers, following the London-listed group's relative de-rating in recent months, widening the discount to about 17-18% on a p/e basis, which was seen as unjustified.
“IHG’s enhanced long-term EPS growth algorithm, improved enterprise platform, and optionality on ancillary revenue streams merits a narrower valuation discount to its key US peers, in our view,” the analysts said.
As for FTSE 100 peer Whitbread, the Goldman leisure team say it is "a business with the appropriate strategy to take advantage of structural opportunities and a strong management team", but the bank's pre-tax profit estimates are now 2% below the City consensus for 2025 and 2026,
What's more, "soft UK industry revenue per available room trends could weigh on the short-term outlook", they opined.