FIRST QUARTER TRADING UPDATE TO 31 MARCH 2020
Highlights |
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FIRST QUARTER TRADING UPDATE TO 31 MARCH 2020
Highlights |
Category: Worldwide - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2020-05-07
- 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.”First Quarter performanceAmericas
RevPAR was down 19.3% in Q1, driven by occupancy declines of 10%pts. In the US, RevPAR was down 19.6% for the quarter and 49% in March, impacted by the sharp decline in travel due to the outbreak of Covid-19. March performance was ahead of both the industry and our weighted segments, with relative outperformance across our Mainstream and Extended Stay brands. Our distribution is weighted towards non-urban markets, which account for ~85% of our estate and which saw a less severe RevPAR decline than urban markets in March. We also have a lower degree of reliance on large groups and events and on international inbound travel, with domestic travel making up ~95% of our demand.
Elsewhere in the region, Canada was down 20% in Q1, Latin America and the Caribbean were down 14% and Mexico was down 18% (with declines in March of 51%, 49% and 45%, respectively). At the end of April, we had ~90% of our estate open (~440 closed hotels) across the Americas, with our Luxury and Upscale portfolio seeing the greatest impact. We anticipate that RevPAR for April will be down around 80%, with occupancy levels for comparable open hotels in the mid-20% range.
We opened 2.5k rooms (26 hotels) and removed 3.5k rooms (27 hotels) in the quarter, with our net system size growing 2.4% YoY. We have seen construction activity continue through April, albeit at lower levels, with 10 hotels breaking ground during the month. We signed 6.1k rooms (61 hotels) in the quarter, including 12 avid hotels and 5 Atwell Suites.
Europe, Middle East, Asia & Africa
RevPAR was down 25.7% in Q1, including a 63% decline in March. Q1 RevPAR was down 22% in the UK (March down 55%), with London down 25% (March down 61%). Continental Europe RevPAR was down 28% for the quarter (March down 72%). Elsewhere, the Middle East was down 21% for the quarter (March down 60%), while Australia and Japan were down 22% and 35% respectively.
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