If hotel bookings can be unpredictable, broker upgrades can sometimes be just as surprising.
Intercontinental Hotels Group PLC (LSE:IHG) has gone from JP Morgan’s least favoured to most favoured in a single step, with the bank lifting its rating from “underweight” to “overweight” and raising its target price from 8,500p to 10,400p.
Shares climbed 3.3% to top the FTSE 100 leaderboard on Friday.
The case rests on visibility. Revenue per available room (RevPAR) may be wobbly across the US, China and the UK, but IHG’s earnings stream is steadied by its asset-light structure.
By franchising and managing rather than owning hotels, it can deliver high single- to low double-digit profit growth, while free cash flow conversion of around 55% supports ongoing buybacks of roughly 5% of shares each year.
The real cushion comes from ancillaries: loyalty fees and credit card tie-ups now generate 14% of revenue and are less cyclical than room bookings. JPM sees credit card fees rising from $80 million this year to $120 million by 2028.
With 338,000 rooms in the pipeline, signings up 15% in the first half and recent acquisitions adding 150-plus hotels, IHG looks positioned for mid-teens earnings growth through to 2027.