The operator of brands such as Crowne Plaza, Holiday Inn and InterContinental said revenue per available room grew 1.5 percent in the three months to June 30, down from 2.7 percent in the first quarter and 2.5 percent a year earlier.

The Easter holiday, when there are fewer business travellers, fell in the second quarter this year versus the first quarter last year.

Chief Financial Officer Paul Edgecliffe-Johnson said that U.S. oil producing states continued to be a slight drag. Results also showed negative growth in the Middle East, which has been hurt by similar conditions.

IHG stock, which has gained over 20 percent this year, was down 4.2 percent at 4,222 pence at 0805 GMT.

RESILIENT TRAVELLERS

Hoteliers last year saw attacks in Europe hurt demand, but Edgecliffe-Johnson said that IHG had seen no impact from attacks in London and France this year.

"In a way our guests around the world have had to get used to the frequency of attacks and they have become very resilient," he said.

Boosted by a strong first quarter, the group posted an 7 percent rise in six-month underlying operating profit to $365 million and said it remained confident in the 2017 outlook.

IHG has reduced its ownership of hotels to expand via a cheaper fee model, under which it franchises and manages hotels, and focused on business customers to head off the challenge from the likes of Airbnb.

It is launching a midscale brand in the United States that will be franchise-ready in the fall of 2017 with the first hotels beginning construction in early 2018 and opening in 2019.

Edgecliffe-Johnson said that the early interest from midscale hotel owners has been "very encouraging" and that he believed that the brand would be a "huge growth engine" over a long period.

Steve Clayton, who manages HL Select UK Growth Shares fund which holds IHG shares worth 10.4 million pounds, expressed confidence in the company's prospects.

"InterContinental's asset-lite business model is a reliable cash generator, and that allows it to regularly return funds to shareholders, even as it grows its estate globally," he said.

(Reporting by Esha Vaish in Bengaluru; editing by Jason Neely and David Holmes)

By Esha Vaish