IHG Reports 19% Middle East Revenue Decline Amid Iran Conflict, Citing Global Diversification Strength
Key Takeaways
- •IHG's Middle East RevPAR fell 19% in the second quarter as the Iran conflict disrupted regional tourism and international travel flows.
- •The Middle East represents only 5% of IHG's global market, and the company expects regional declines to be fully offset by growth in other markets.
- •US revenue growth accelerated from 3.6% to 5.4% in the second quarter, supported by the FIFA World Cup and a stronger domestic economy.
- •Total revenue increased 7% to $1.3bn year-to-date, while pre-tax profit declined 9% to $578m over the same period.
- •IHG opened nearly 200 hotels in the first half of the year and raised AI-related spending to support back-office operations and digital platforms.
Intercontinental Hotels Group (IHG), the owner of the Holiday Inn brand, reported a sharp decline in Middle East revenue as the Iran war disrupted the region's tourism sector, an area that has been a growth corridor for global hospitality chains investing in Gulf-led tourism expansion.
Revenue per available room (RevPAR) — the hospitality industry's standard performance metric combining occupancy and pricing — fell 19 per cent in the Middle East in the three months to June, following a two per cent decline in the prior quarter. The broader Europe, Middle East, and Asia region saw growth slow from 5.6 per cent in the first quarter to just 0.6 per cent in the second.
IHG, which also owns the Crowne Plaza and Vignette Collection brands, told shareholders it is facing "ongoing impacts from the Middle East conflict, including some wider disruption to international travel flows."
However, the group emphasized that the Middle East accounts for only five per cent of its global market.
"We continue to expect these [impacts] to be fully offset by growth in demand elsewhere," IHG stated.
"This demonstrates the strength of IHG's business model which is strategically diversified and resilient," said Elie Maalouf, IHG's chief executive.
FIFA World Cup Drives Americas Growth
IHG reported a trading boost from the FIFA World Cup held this summer, which contributed one per cent revenue growth to its Americas performance in the quarter ending June.
The hotel group's US market growth accelerated from 3.6 per cent in the first quarter to 5.4 per cent in the second. "This uptick reflected supportive trading conditions across all demand drivers as a result of a stronger US economy," the company said.
For the three months to June, the FTSE 100 firm posted revenue growth of 3.1 per cent in the UK, 2.3 per cent in continental Europe, and six per cent in East Asia and the Pacific.
Financial Results and Expansion
Total revenue grew seven per cent to $1.3bn (£928m) in the year to June, while pre-tax profit declined nine per cent to $578m (£428m).
The group reported record new site development in the first half of the year, with nearly 200 hotel openings during the period. IHG operates 7,100 hotels across the UK, with an additional 2,400 properties in the development pipeline.
IHG also disclosed increased investment in artificial intelligence, with gross costs rising eight per cent to $12m over the past three months. The company attributed the increase to expanding AI deployment across back-office functions, websites, and mobile applications, part of a broader hospitality industry trend of leveraging automation for customer service and operational efficiency.
Shares in the group fell 2.5 per cent to 151p in early trading.