Peel Hunt cuts earnings forecasts for IHG as 'tough winter' nears

Peel Hunt has cut both earnings forecasts and its rating on InterContinental Hotels Group, as the Covid-19 pandemic continues to undermine the international hospitality sector.

The broker, which downgraded its recommendation to ‘hold’ from ‘buy’, now believes full-year revenue per available room (RevPar) will be down 52% in 2020, compared to its previous forecast for a 46% fall.

RevPar in 2021 is likely to be down 33%, Peel Hunt added, compared to an earlier forecast for a 27% decline.

As a result, Peel Hunt now believes earnings per share in 2020 and in 2021 are likely to be down 54% and 21%, respectively.

“We believe that these changes put our forecasts at the bottom of the consensus range,” the analysts noted.

IHG, which is due to post third-quarter numbers on Friday, last updated the market on trading in August. “At that time, we expected a slow and steady recovery with a boost from a vaccine in 2021. Since August, market data for US hotel shows slowing growth, possibly stagnation; it is hard to tell.

“In the Europe part of EMEAA, the recovery has clearly into reverse. Elsewhere in EMEAA trading is more mixed. Only China – a small minority of revenue – is following the script with continued growth.

“The travel industry generally is set for a tough winter. IHG has a hotel portfolio which mainly targets domestic travellers and has limited exposure to larger groups and conferences. But this is not enough to insulate the bottom line from weakness in demand.”

As at 1415 BST, shares in IHG were down 1% at 4,119.0p. Peel Hunt also reduced its target price for the stock to 4,300p from 5,000p.

IHG owns the InterContinental, Holiday Inn and Crowne Plaza brands, among others.