90% of IHG estate open

IHG

InterContinental Hotels Group reported that the pace of hotels reopening had continued to accelerate, with only 10% of the global estate now closed. 

The group said that it expected to see a comparable revpar decline of 75% for the second quarter, reporting “small but steady” improvements in revpar during the quarter.

In the Americas region, around 5% of the group’s hotels were closed; predominantly managed luxury and upscale hotels, and those outside of the US. The company described “good progress” across the EMEAA region as government-mandated hotel closures eased; around 30% currently remain closed. In Greater China, 1% were closed.

The revpar decline was expected to result in a 52% drop in the second half. In April IHG recorded an 82% drop, with 76% in May and an estimated 70% for June. The group said: “The small but steady improvements in revpar through the second quarter are mostly attributed to the Americas franchised estate and the Greater China region. Occupancy levels in comparable open hotels have improved to over 40% in the US.”

The second-quarter revpar decline for the Americas region was estimated at 72%. The US franchised estate, weighted towards domestic demand-driven mainstream hotels, with a lower reliance on large group business and higher distribution in non-urban markets, was estimated to have declined by around 67% in Q2. This compared to an estimated 87% decline in the US managed estate, which was weighted to luxury and upper upscale hotels in urban markets that individually contributed higher fee revenue than a mainstream franchised hotel.

In the company’s owned, leased and managed estate, 17 out of 26 hotels were still closed, with those which remained open operating at very low occupancies. As a result, the group expected to report first-half operating losses before exceptional items in the region of $25m for the division. A gradual reopening of these hotels was expected through the third quarter, with low occupancies and lower than usual non-room revenues.

The group confirmed that as at 26 June, it had around $2bn in available liquidity, which, at its previous trading update in May, it had said would provide 18 months of headroom in a zero-occupancy environment. 

The group has continued to expand, signing an agreement to open a hotel under its InterContinental brand in Rome in 2022. IHG joined a consortium including Oaktree, Westmont Hospitality Group, strategic investment partner and operator, and UniCredit S.p.A, the project’s senior lending bank. The project was held by a newly-established real estate investment fund managed by Milan-based Castello SGR.

Willemijn Geels, VP, development, Europe, IHG, said: “The signing of an InterContinental in Rome represents an important moment in the growth of our luxury portfolio and brand presence across Europe. In these challenging and unprecedented times, this signing shows the continued trust our owners and partners place in IHG and our brands. We are delighted to partner with Oaktree Capital and Westmont Hospitality Group and look forward to offering InterContinental guests a rich and unforgettable experience in the Eternal City.”


Alfredo Maria De Falco, deputy head of CIB & head of CIB Italy at UniCredit commented: “Confirmation by primary international investors of their commitment to Italy even in this difficult time is a strong signal of the country's unimpaired attractiveness as a cultural, tourist and business destination. UniCredit is a strategic partner for the development of large real estate projects and we are happy to support this important initiative in a sector, such as the luxury hotel industry, which can be a driving force for the recovery of tourism in Italy.”

Insight: With results season now looming,  the numbers are starting to come in for everyone’s lockdown hit and, at IHG, they were as expected. In May the company said that its strong domestic business and comparative lack of exposure to meetings and events meant that it was “well positioned” to make it through the pandemic and this has been the case thus far, current wobbles in the wider US environment notwithstanding.

The group, as with its global rivals, had expected to see a race to convert from weaker brands and independent hotels and anecdotal evidence suggests that this is proving to be the case. Where Barr’s crystal ball may have failed him was in the drive of nervous customers away from homesharing - Airbnb has seen growth from guests eager to get away from absolutely everyone. 

One area where we look to the results proper in August is the company’s resorts offering, one of the segments which are expected to come out strongly - if the wading in of PE groups is any indication, and one suspects it very much is. Last year saw the group bolster its holdings with the $300m purchase of Six Senses Hotels Resorts Spas, with aspirations to expand the brand to more than 60 properties globally over a decade. Will it take some of that $2bn to accelerate this much-needed part of its business?