Middle East worries, interest costs take shine off IHG Q3 beat

Oct 22 (Reuters) - Rising interest costs and the impact of conflict in the Middle East knocked IHG's shares on Thursday, even as the Holiday Inn owner beat quarterly room revenue forecasts on strong growth in the US, its largest market.

Shares in the hotel group, which also owns Crowne Plaza, were down 3.2% at 0820 GMT after it forecast higher adjusted interest expenses in 2027 and investors focused on its exposure to Saudi Arabia and the wider Gulf region.

IHG reported 5.3% growth in third-quarter revenue per available room (RevPAR), a key industry metric, above the 4.4% expected in a company-compiled consensus. The company said it remained confident of meeting market expectations this year.

A strong summer season and spending by affluent travellers have supported demand, though geopolitical conflicts, civil unrest, high airfares and elevated borrowing costs continue to cloud the outlook for tourism and hotels.

In the Middle East, RevPAR was flat after a 19% decline in the previous quarter, as strong travel demand in countries including Egypt and Turkey offset a 12% fall in the Gulf Cooperation Council region due to the Iran war.

Recent attacks on Saudi Arabian airports have added to pressure on travel in the region.

JPMorgan analysts said profit-taking could weigh on the stock, which has gained about 17% this year, while IHG's forecast for higher interest costs in 2027 could pressure earnings estimates.

Saudi Arabia accounts for about 4% to 5% of IHG's hotel development pipeline, the analysts said.

IHG said its preliminary view for 2027 adjusted interest expenses was for an increase of $40 million to $60 million from the $230 million to $240 million expected this year.

RevPAR in the US rose 6.9% in the third quarter, driven mainly by group bookings, while China's fell 3.3% due to adverse weather and the timing of public holidays.

(Reporting by Simone Lobo in Bengaluru. Writing by Yadarisa Shabong. Editing by Janane Venkatraman and Mark Potter)