IHG Covid-19 Update: 1,000 Hotels Closed & Enough Cash For 18/36 Months


IHG today released its first-quarter results and gave an update of how April was for hotels during Covid-19.

The group still has 1,000 hotels closed (440 in the Americas & 560 in the EMEAA), but only 10 in Greater China, where it was close to 180 at the peak. The occupancy rate at the open hotels is hovering in the low to mid 20’s range (percentage).

You can access IHG here.

READ MORE: IHG Rewards Club Rate & Bonus Points Promotions

Here’s the release from IHG:

  • Group Q1 comparable RevPAR1 down 24.9%; March down 55%; April expected to be down around 80 %
  • ~15% (~1,000 hotels) of the estate closed as at the end of April; ~10% (~440 hotels) in the Americas, ~50% (~560 hotels) in EMEAA and ~2% (10 hotels) in Greater China
  • Occupancy levels in comparable open hotels in the low-to-mid 20% range
  • 4.6% YoY net system size growth to 882k rooms
  • 6k rooms opened, including 1k in March
  • Signed 14k rooms (104 hotels) in the quarter, including 4k in March, taking the pipeline to 288k rooms
  • Delivering on our cost reduction and cash conservation actions across the System Fund and Fee Business; on track to reduce Fee Business costs by up to $150m and capex by ~$100m; further cost measures to be implemented to manage the business through the evolving trading environment
  • ~$2bn of liquidity available; extension secured on $1.275bn syndicated RCF until September 2023 in addition to covenant waivers already in place; £600m (~$740m) of CCFF funding issued

Keith Barr, Chief Executive Officer, InterContinental Hotels Group PLC, said: “Covid-19 represents the most significant challenge both IHG and our industry have ever faced. We are responding on every front and taking decisive action to the benefit of all our stakeholders. Our top priority remains to support our guests, colleagues and hotel owners through this crisis, whilst protecting for the long term and positioning the business for recovery. I would like to sincerely thank everyone at IHG and our owners for the way they have responded to this challenge. This includes protecting the health and safety of guests and colleagues; flexing booking and cancellation options for guests and protecting their loyalty membership status; and repurposing hotels to provide essential activities including accommodation to frontline workers, military personnel and vulnerable members of society. We have been working closely with our owners to help keep hotels open, including advising on adjusting operations, providing fee relief and payment flexibility, and collaborating to secure broader government support for the industry.

Following a solid performance in the first two months of 2020, occupancy levels dropped to historic lows in March and April, as social distancing measures and travel restrictions came into effect around the world. Global RevPAR in the first quarter declined by 25%, including a 55% decline in March, and we anticipate April to be down by around 80%. In the US, our biggest market, our franchise portfolio of 3,750 mainstream hotels has seen lower levels of RevPAR decline than the industry, and as at the end of April we had ~90% of our estate open. Our business is also weighted towards non-urban markets that are less reliant on international inbound travel and large group meetings and events, which provides a level of resilience during this difficult period.

Building on our conservative balance sheet approach, we are delivering on our plans to reduce costs, preserve cash and strengthen our liquidity. We remain focused on managing the business appropriately through this unique period while also positioning IHG to emerge strongly when our markets recover. We anticipate continued disruption to travel in the months ahead, and forward visibility on the timing and shape of improvements in demand remains very limited. We are though still seeing hotel openings including the Regent Shanghai Pudong later this month, and great signings such as the InterContinental in Rome. Progress also continues around the world to build upon the launches of our avid, voco and Atwell Suites brands.

IHG’s response to Covid-19 is centred on remaining true to our purpose and values, and we are taking all necessary actions to manage through the uncertainties and challenges facing our industry. Our strategy is unchanged, and we will look to continue building on the resilience of our business model relative to the industry.”

Here’s a more comprehensive statement:

Download (PDF, 167KB)

And the presentation:

Download (PDF, 639KB)


IHG believes that it has a quicker path to recovery as most of its hotels are outside of urban centers and more transient than group/meeting business. Select service hotels (likes of Candlewood and Holiday Inn Express), where IHG’s strength is, tend to perform better than full service and luxury ones during recessions.

The occupancy break even rate for select-service hotels with bare bones services is in the 20s. Higher at full-service hotels. IHG may see an increasing number of conversions to its Indigo, Kimpton, and Voco brands if independent hotels feel that they need more robust distribution.

The hotel company has enough money on hand to survive for 18 months at zero revenue while at the current burn rate would survive twice that long (3 years). They don’t believe that OTAs could grab more market share during this downturn compared to what happened after the nine-eleven and fiscal crisis.

IHG only sees rather insignificant revenue from its credit card partners. Compare that to both Hilton and Marriott, who collected close to $1B each for selling points in advance to Amex and Chase.

There were no mentions about the IHG Rewards Club or the loyalty side of the business at all. Probably not something that they see significant due to IHG’s portfolio of hotel brands (select service).

I don’t see the purpose of rewriting these releases, but count on that reader who wishes can open the docs. The above notes are from the conference call that I listened to.