A sluggish start to the year and lacklustre outlook is weighing on Holiday Inn and Crowne Plaza owner InterContinental Hotels (IHG), but shareholders should stick with the company ahead of a cash windfall on 23 May.

The £6 billion cap, down 1.3% to £26.61, grew revenue per available room (RevPAR) by just 1.5% in the first quarter, a significant slowdown from the 5.9% growth achieved in the first quarter of 2015.

It blames this on the fact that Easter fell in March this year whereas in 2015 it came at the start of its second quarter in April.

ICTLHTLSGP - Comparison Line Chart (Rebased to first)

The group says its Americas division is still being impacted by the weak oil price. RevPAR in its oil-producing markets was down 10.3% compared with 3.2% growth elsewhere in the region, resulting in 1.9% growth overall.

Low oil prices are also weighing on the Middle East, leading to an overall 1.1% RevPAR decline in the Asia, Middle East and Africa region.

In Europe, RevPAR was up by just 1.4% as the Paris attacks and new supply in London weighed on growth.

The best bit of news in an otherwise weak trading statement is InterContinental confirming it will return $1.5 billion to shareholders on 23 May through a special dividend and share consolidation.

Panmure Gordon forecasts full year RevPAR growth of 2.1%, compared with 4.4% in 2015, with pre-tax profit 1.3% higher at $601 million.

The stock is trading on a price to earnings ratio of 20.5, which looks expensive given the sluggish start to the year and lack of growth catalysts.

Panmure’s target price is £28, implying 5.2% upside.

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Issue Date: 06 May 2016