(Reuters) -Holiday Inn owner InterContinental Hotels Group reported a sharp slowdown in room revenue growth in the third quarter as weak demand in China and a subdued U.S. market overshadowed a solid performance in Europe.

Revenue per available room (RevPAR)- a key performance measure for the hotel industry - rose by 1.5% in the quarter ended Sept. 30, IHG said on Tuesday, slowing from 3.2% growth in the three months prior.

RevPAR grew 4.9% in the Europe, the Middle East, Africa and Asia region, while in China, RevPAR fell 10.3% as last year's strong domestic travel recovery faded.

IHG shares were down 1.8% at 8,412 pence early on Tuesday, after rallying 20% this year as the group saw rising demand and lifted prices.

After a recent boom in the travel industry, customers are beginning to baulk at elevated prices as demand normalises to pre-COVID levels in many markets while in China IHG saw a shift in demand away from domestic tourism to overseas travel within the Asia Pacific.

IHG's licensing agreement with The Venetian Resort and The Palazzo in Las Vegas will end on Jan. 1, 2025, removing 7,092 rooms or about 0.7% of its system from its portfolio, the owner of the Crowne Plaza and Regent hotel chains said.

"We do expect IHG to relatively under perform U.S. peers, with 1.5% RevPAR growth expected to be at the bottom of the pack for Q3," Richard Clarke at Bernstein said in a note, ahead of quarterly results from Hilton on Wednesday and Marriott on Nov. 4.

Clarke said that a key question for management would be how they plan to accelerate RevPAR back to about 3% in the fourth quarter.

The company said it expects to close 2024 in line with market expectations. For 2024, analysts on average expect the firm to post RevPAR growth of 2.6%, according to a company compiled consensus.

IHG's net system size - the number of new rooms opened minus those that are closed - grew 4.1% in the third quarter.

(Reporting by Yadarisa Shabong in Bengaluru and Chandini Monnappa; Editing by Rashmi Aich and Susan Fenton)