Intercontinental Hotels Group (NYSE:IHG) said first-half 2026 performance was supported by broad-based revenue per available room growth, record development activity and expanding margins, while management expressed confidence in continued system growth despite uneven conditions in China and the Middle East.
Chief Executive Officer Elie Maalouf said global RevPAR increased 4.1% in the first half, with gains across the company’s three regions, brands and customer segments. Gross system growth rose 6.5%, while net system growth reached 5%. Openings and signings each increased 8% year over year on an organic basis, according to the company.
China growth continues despite second-quarter moderation
China remained a major focus of investor questions after RevPAR growth slowed from 5.7% in the first quarter to 0.8% in the second quarter. Maalouf said first-quarter travel was lifted by an extended Chinese New Year and newly introduced school holidays, which he said may have pulled some leisure and business travel forward from the second quarter.
For the first half, China RevPAR rose 3.1%. Tier 1 markets, including major cities as well as Hong Kong and Taiwan, and Tier 4 leisure and resort destinations performed well, Maalouf said. Tier 2 and Tier 3 cities experienced continued softness in business transient demand, though he described that trend as longstanding rather than new.
Management said IHG’s China business continues to expand, reaching 900 open hotels and potentially 1,000 by the end of the year. The company has roughly 600 additional hotels under development in the country. Maalouf said China profit increased 25% year over year and that occupancy improved during the first half.
“We do not see signs of oversupply,” Maalouf said, adding that new hotel supply was being absorbed within IHG’s system and that the business also achieved rate growth over the full half-year period.
Addressing concerns about removals in lower-chain-scale brands in China, Maalouf said IHG has a directly controlled business in the country rather than operating through partners, joint ventures or master franchisees. He said the company maintains close owner relationships and is selective about deals, focusing on hotel quality, fees per key and expected owner economics. IHG does have removals in China, he said, but described them as largely related to normal estate renewal and some post-COVID properties no longer suited to the market.
Fee growth expected to catch up as hotels mature
Chief Financial Officer Michael Glover said the gap between system growth and fee revenue growth principally reflects the company’s high level of openings. Newly opened hotels generally require time to reach stabilized occupancy, room rates and hotel revenues, while many contracts include fee structures that increase over the first several years of operation.
Glover said the fee-growth “triangulation” improved by about 40 basis points at the group level year over year in the first half. In the U.S., the improvement was 110 basis points. Management expects the gap to continue narrowing as hotels mature, though Maalouf said there would continue to be some lag as long as IHG maintains a high pace of openings.
Glover said consensus expectations for 4.7% net unit growth were “in and about the right place,” while noting the company delivered 5% in the first half and sees opportunity to exceed the consensus figure. The company said it has limited exposure to Revo, a German hotel operator that entered bankruptcy, with six hotels and 820 rooms associated with the operator.
Management also said it sees continued potential for fee-margin expansion. Glover said IHG could continue delivering 100 to 150 basis points of margin improvement over the medium to long term as system revenue expands faster than costs.
Owner economics and technology investments
Maalouf said IHG has taken several steps since 2024 to support hotel owner economics, including lowering loyalty assessments, raising reward-night reimbursement rates and reducing the cost of its IHG Ignite marketing program. He also cited lower food-and-beverage program costs, reduced costs for new-build prototypes and conversion packages, and expanded procurement offerings.
The company is rolling out a redesigned commercial services program in the Americas. The program, which provides services including field marketing, digital and web support, training and group business assistance, is in place at about 500 hotels. Maalouf said it is expected to expand across the region and will lower costs for 75% of participating hotels.
Management said the cost reductions are being generated within the system fund rather than through IHG’s own profit and loss account. Maalouf said the company is using the scale of its system, technology and process improvements to create efficiencies that it can share with owners.
Artificial intelligence is being applied in guest acquisition, hotel performance and corporate efficiency, Maalouf said. He cited AI-enabled marketing, revenue management, customer relationship management, content management and conversational trip-planning tools. However, he said it was too early to quantify potential hotel cost savings from AI because operational conditions vary by region, brand and jurisdiction.
Demand trends, Middle East outlook and new fee streams
Glover said global business demand increased 2% in the first half, leisure demand rose 3% and group demand grew 6%. In the U.S., business increased 3%, leisure was up 4% and groups advanced 10%. He said the World Cup contributed about 100 basis points to U.S. second-quarter performance and is expected to represent roughly 40 basis points for the full year, but management did not view the event as the fundamental driver of results.
Maalouf said the Middle East has been recovering gradually since conflict conditions peaked in March and April. He said IHG expects to offset any impact from the region through the remainder of the year if current conditions persist, while noting that the company’s regional pipeline is concentrated in Saudi Arabia, Egypt and Turkey.
IHG is also building its branded residences business. Glover said the company has 35 hotels or branded residences open and selling across 19 countries. The business generated approximately $5 million to $10 million in the prior year, and management said it could become a substantially larger fee stream from 2027 and beyond as projects currently under construction enter sales phases.
On capital deployment, Glover said key money was slightly lower in the first half but that IHG continues to expect key money and maintenance capital spending of $200 million to $250 million. Maalouf said the company is not seeing meaningful key-money requirements for its Garner conversion brand, except in select high-barrier-to-entry or high-RevPAR locations.
IHG said its next market update will be its third-quarter trading statement on Oct. 22.
About Intercontinental Hotels Group (NYSE:IHG)
Intercontinental Hotels Group plc (IHG) is a multinational hospitality company that develops, owns, manages and franchises a broad portfolio of hotels and resorts. The company operates across full-service luxury and upscale segments as well as midscale and extended-stay categories, providing lodging, food and beverage, meeting and event services, and related guest amenities. IHG’s business model emphasizes brand franchising and management agreements, while retaining ownership or direct investments in a smaller portion of its global property portfolio.
IHG’s brand portfolio spans global and regional names designed to serve different traveler needs and market segments.
