IHG’s Q2 Results RevPAR Down 75% & 5% Global Hotels Closed

It was IHG’s turn today to release their second-quarter 2020 numbers, and they were quite in line with what Hilton and Marriott have announced in the past week.

IHG performed somewhat better due to being heavy on the select service versus luxury that has performed better in this environment. The global RevPAR (Revenue Per Available Room) was down by 75%, and 5% of IHG’s hotels (roughly 300) were closed at the end of July.

You can access IHG here.

READ MORE: IHG Rewards Club Rate & Bonus Points And Miles Promotions

Here are some slides from the presentation that I found interesting:

Note that this is not the occupancy rate but RevPAR performance of different regions in 2020. It shows how fast and earlier the Greater China demand collapsed, but how it has rebounded faster.

Presentation slide that deals with IHG Rewards Club. Not sure exactly what this 25% more value is measured? 25% fewer points. At least IHG now states that 80% of hotels globally has implemented this program.

There is quite a bit of information on this slide. The number of hotels closed 16% is high in EMEAA (Europe, the Middle East, Africa & Asia). IHG also breaks down the occupancy level across its regions, and by its segments (mainstream, upscale, and luxury).

I find it interesting how IHG breaks down its brands in three segments of mainstream (essentially all select service except Holiday Inn), upscale (theoretically Holiday Inn would belong here), and luxury (all clear).

This shows how thin IHG is in the luxury segment that helps it during this environment where many luxury hotels are still closed or facing very low occupancy rates compared to select service (mainstream in IHG speak).

Here’s IHG’s presentation:

Download (PDF, 2.6MB)

Here’s the press release:

Keith Barr, Chief Executive Officer, IHG, said: “Throughout the crisis we have continued to act responsibly, doing all we can to support our hotel colleagues and owners, and create a clean, safe stay experience that we know guests can trust. The teamwork, dedication and care that our colleagues and owners have shown to adapt our approach is central to meeting the evolving needs and expectations of guests, as well as the communities in which we operate. I would like to sincerely thank everyone for ensuring that our purpose of providing True Hospitality shines through, even in the toughest of times.

The impact of Covid-19 on our business has been substantial. Global RevPAR declined by 52% in the first half and was down 75% in the second quarter, when occupancy at comparable hotels fell to 25%. Despite this challenging environment, we delivered an operating profit of $74m. Small but steady improvements in occupancy and RevPAR through the second quarter continued into July, with an expected RevPAR decline of 58%, and occupancy rising to around 45%.

The support we have offered owners, such as fee relief and increased payment flexibility, was well received. Together with other measures we’ve taken to preserve cash, we have maintained substantial liquidity of around $2bn. Our ongoing actions to reduce costs include plans to make around half of the $150m of savings we will achieve this year sustainable into 2021, alongside continued investment in our growth initiatives. However, with limited visibility of the pace and scale of market recovery, we are not proposing an interim dividend.

As has been the case in previous downturns, domestic mainstream travel is proving to be the most resilient. Our weighting in this segment, led by our industry-leading Holiday Inn Brand Family, positions us well as demand returns in our key markets. In the US, our mainstream estate of almost 3,500 hotels is seeing lower levels of RevPAR decline than the industry, and is operating at occupancy levels of over 50%.

Reflecting our long-term growth prospects, and the strength of our brands and owner relationships, we opened more than 90 hotels in the half and strengthened our pipeline with an average of one new signing a day, including almost 100 for our Holiday Inn Brand Family. We have also taken voco, our upscale conversion brand, outside of EMEAA, with initial signings in the US and Greater China.

The impact of this crisis on our industry cannot be underestimated, but we are seeing some very early signs of improvement as restrictions ease and traveller confidence returns. Whilst the near-term outlook remains uncertain and the time period for market recovery is unknown, we are well positioned with preferred brands in the largest markets and segments, a leading loyalty platform and one of the most resilient business models in the industry. This gives us confidence in our ability to meet the needs of our guests and owners, and to emerge strongly when markets recover.”

H1 Comparable RevPAR: Global (52)%. Q2: Global (75)%; Americas (71)%; EMEAA (88)%; Greater China (59)%.

  • Net system size growth of 3.2% YoY. In H1, 12k room additions and 12k removals, including 2k relating to a previously flagged portfolio of hotels in Germany. Global estate now 883k rooms, over 5,900 hotels.

  • First half signings of 26k rooms (181 hotels). Total pipeline now stands at 288k rooms (1,932 hotels).

  • Operating profit from reportable segments down 82% to $74m before System Fund result of $(52)m and operating exceptional items of $(255)m predominantly comprising non-cash impairments to owned and leased hotels and acquired management agreements, together with impairments of trade deposits and receivables.

  • On track to reduce Fee Business costs by ~$150m in 2020; targeting around half this level to be sustainable into 2021.

  • Q2 free cash flow broadly neutral, resulting from strong cash management; H1 outflow of $66m.

  • Total available liquidity of $2.0bn at end of June and end of July.

  • July comparable RevPAR expected to be ~(58)%; occupancy levels in comparable open hotels improved to ~45%. 317 hotels or 5% of the estate closed as at end of July; 3% of Americas, 16% of EMEAA and <1% of Greater China.

Here are the complete financials:

Download (PDF, 1.47MB)


I like this IHG’s old fashioned presentation when you combine it with the commentary (I listened to their conference call).

They don’t mention the issue of potentially losing more than 100 hotels in North America (read more here) due to a dispute with the SPT on the presentation. They commented about the situation on the call, however. IHG has no performance guarantee for these hotels, but there is something called the owner’s priority in place that these hotels don’t meet, and the SPT can use this end the affiliation with IHG. The talks are still on-going. They commented that these 100 hotels represent less than half of a percent of IHG’s performance.

There are quite a few conversions taking place that tend to accelerate during the crisis (flag changes or independent hotels becoming part of a chain). This appears to benefit the voco brand that IHG often uses for conversions. Previously, they marketed the Indigo for the same purpose.

IHG also sees the business travel eventually bouncing back, and the scenarios that are drawn at the height of the pandemic/crisis don’t tend to materialize.