IHG anticipates its global RevPAR will drop 60% in March

The 87-room Avid Hotel Oklahoma City-Quail Springs opened 199 days after it began development.
IHG franchises, leases, manages or owns more than 5,900 hotels, including the Avid Hotel Oklahoma City-Quail Springs. Photo credit: IHG

IHG offered a business update Friday in light of the COVID-19 epidemic, which it said will cause a 60 percent decline in its global revenue per available room in March. Cancellation activity for April and May and current booking trends indicate continued challenging conditions, it noted.

IHG said it has already taken action to challenge all discretionary costs and reduce salary and incentives, including “substantial decreases” for board and executive committee members. These actions, it said, will result in a reduction of up to $150 million in its fee business costs. Similar actions, along with a reduction in marketing spend, are being taken in response to expected lower assessment fee receipts. The company said it is also taking action in its owned, leased and managed lease hotels to contain costs.

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To support owners, IHG has launched a package of measures including delaying renovations and relaxing brand standards.

To protect its cash flow, IHG is reducing its gross capital expenditure by around $100 million from 2019 levels and managing working capital. The company’s board also is withdrawing its recommendation of a final dividend of 85.9 cents (roughly $150 million) and will defer consideration of further dividends until visibility has improved.

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The measures follow a 6 percent global RevPAR decrease across January and February. During that time, a broadly flat performance in the United States was offset by declines in Greater China, which saw an almost 90 percent decline in February. Today, IHG said it has 60 hotels closed compared to 178 at the peak. In recent days, it has begun to see low levels of improvement in occupancy.

“At this unprecedented time, our top priority remains the health and wellbeing of our guests, colleagues and partners, and ensuring that in light of such a significant impact on the global economy and, in particular, on the travel industry, we take the right steps to protect the long-term health of our business,” IHG CEO Keith Barr said in a statement.

“Demand for hotels is currently at the lowest levels we’ve ever seen. IHG has a robust business model and the measures we are announcing today to reduce costs and preserve cash give us the capacity to manage the business through this unique environment and to support our owners during this incredibly difficult time.

“These were not easy choices and we are mindful of the impact these decisions will have on our colleagues and shareholders. However, we believe that these are essential to ensuring that we come out of this as strong as we possibly can and ready to capitalise on what remains an industry with excellent long-term growth potential.”

IHG franchises, leases, manages or owns more than 5,900 hotels and 884,000 guestrooms in more than 100 countries.