Holiday Inn owner sees improvements as hospitality faces renewed COVID-19 pressure

Holiday Inn hotel in Southampton, England. Photo: Naomi Baker/Getty Images
Holiday Inn hotel in Southampton, England. Photo: Naomi Baker/Getty Images

InterContinental Hotels Group (IHG), the owner of Holiday Inn and Crown Plaza showed signs of recovery in the last few months from lows of early 2020 due to coronavirus pandemic.

The UK-based hotelier also owns Regent and the Hualuxe hotel chains.

IHG (IHG.L) said that revenue per available room (RevPAR) — the favoured industry metric — was down 53.4% in the third quarter of the year. There was a 75% drop in Q2 compared with 2019 levels.

Occupancy levels also improved, rising from 25% in Q2 to 44% in the third quarter.

Meanwhile, quarterly comparable RevPAR fell 50% in the Americas, 70% in Europe, Middle East, Asia and Africa.

However, China showed a much stronger recovery, outperforming the rest of the world.

RevPar in the country fell by 23% in Q3, while occupancy at its Chinese hotels were at 57%, after lows of 10% in February.

Previously, before COVID-19’s impact on the hospitality industry, IHG was hit by dozens of hotel closures in China. But, it has since opened another 10 hotels in the country in the quarter.

“Despite the challenges we’ve faced, we have continued to open new hotels and sign more into our pipeline,” chief executive Keith Barr said.

As of September, a total of 199 hotels or 3% of the group’s chains, remained closed.

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Barr added that hotels still have some way to go before getting back to anywhere near normal, as serious global coronavirus restrictions continue.

“A full industry recovery will take time and uncertainty remains regarding the potential for further improvement in the short term, but we take confidence from the steps taken to protect and support our owners and drive demand back to our hotels as guests feel safe to travel.”

“Our actions have resulted in ongoing industry outperformance in our key markets, and we remain focused on leveraging the strength of our brands, scale and market positioning to recover strongly and drive future growth,” he said.

The hotel chain also said it is on track to reduce fee business costs by around $150m (£115m) in 2020, and that it is targeting half this level to be sustainable into 2021.

“We remain on track to reduce Fee Business costs by about $150m in 2020 and with our target for around half of this level to be sustainable into 2021, whilst continuing to invest appropriately in growth initiatives,” Barr said.

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Plunging tourist numbers due to COVID-19 travel restrictions has led to IHG and rivals, including Europe’s biggest hotel group Accor (AC.PA) and Premier-inn owner Whitbread (WTB.L) to slash costs and cut their workforce this year.

But, hotel operators are set to bear the brunt once more of from rising global coronavirus infections and renewed tighter restrictions.

Last week, UK prime minister Boris Johnson announced a new three tier ‘traffic light’ system to tackle the second-wave of COVID-19 cases with businesses in the hospitality industry still subject to a 10pm curfew and can only provide table-service.

The traffic light system will “simplify and standardise” the existing patchwork of local lockdown rules, Johnson said.

Each level — “medium,” “high,” and “very high” — involves escalating restrictions. Most areas in England will automatically move to the “medium” alert level, the PM said. This involves restricting people to socialising in groups of no more than six.

Under the “very high” alert level, pubs and bars will be ordered shut. Local leaders will also have discretionary powers to order other non-essential businesses to close.

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