InterContinental Hotels Group said that it had seen resilient performance from its Holiday Inn brand family, in addition to reporting almost 100 signings under the flags in the first half.
CEO Keith Barr said that the group expected to see opportunities for consolidation as the pandemic progressed.
Barr said: “One’s going to have to assume that with the level of economic impact, not every company is going to get though unscathed. There are property portfolios out there which are going to be challenged and will look to rebrand. There will be some smaller regional players who will have to look to partner or consolidate. There will also be global small brands who are looking at whether they have the right structure.
“It’s going to happen, but not straight away, there is enough government support keeping companies afloat. It’s important to be positioned to take advantages of opportunities, but in the short term to be focused on operations. We need to be thoughtful and prudent as we manage the balance sheet.”
The company said that it had bought in temporary fee discounts for technology and systems fees. “These actions have been well received and we are seeing good levels of cash collection,” commented CFO Paul Edgecliffe-Johnson.
Barr added: “It’s important to remember that most of our owners are small business owners and this crisis has been very challenging. Being part of a branded system means that we have been able to capture demand, where that has been family members quarantining or frontline medical workers and, whether in the White House or Number 10, we have helped to secure government support.”
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%. The group reported an operating profit of $74m, down 82% on the year.
The company reported recovery in China, where less than 1% of hotels were closed as of July.
Barr said: “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%.
“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. But this is not linear, the pace and scale of this recovery remains unclear.”
At at the other global operators, the company said that growth was being led by domestic leisure travel.
The company’s estate was weighted to the mainstream segment, representing more than 70% of its open rooms. In the US, the upper midscale segment within mainstream accounted for around 65% of IHGS rooms in the US, and, in the country, around 95% of business was domestic driven.
IHG said that it had maintained “substantial” liquidity of around $2bn and said that it was confident of operating through the recovery.
The company said that it had opened more than 90 hotels in the half and strengthened its pipeline with signing 181 hotels, taking its total pipeline to 1,932 hotels. It had also taken Voco, its upscale conversion brand, outside of EMEAA, with initial signings in the US and Greater China - 25% of the total pipeline was conversions. Barr said: “Whilst development activity will likely slow, our owners look to the long term. The conversion opportunity is also a compelling one.”
The group reported net system size growth of 3.3% for the first half.
In EMEAA, comparable revpar decreased 58.9% in the first half, driven by occupancy reducing to 34% (Q2: 14%).
In the Americas, 97% of the company’s estate was open at the end of July, with 90% of hotels open during the pandemic as the portfolio was weighted towards non-urban destinations. The company said that upper midscale revpar had outperformed, aided by Holiday Inn Express.
In Greater China, occupancy was over 50% in July and, in the second half, the group saw year-on-year rooms growth on 9.9%. July revpar was expected to be down 36%.
Looking into 2021, the company said that, along with the rest of the industry, it had “limited visibility”.
Insight: Going into this pandemic, IHG was viewed as very much the one to avoid, given its enthusiasm for China, which accounts for 16% of the estate in terms of rooms and 32% of the pipeline. It’s a whole reporting region, not something you see with the other global players.
The Americas still accounts for more than half of revenue, but the company is felt to have topped out in the US with the Holiday Inn family, where the launch of Avid was a move to offer owners another option.
What we haven’t heard from IHG, or indeed anyone else reporting this season, was how the previous enthusiasm for luxury was not panning out. Of those hotels still closed around the world, it is the luxury market which is suffering the most, as well-heeled global travellers have not returned in swathes as yet.
The hopeful news was in what wasn’t being done. Barr was asked whether the company was planning to change the designs of its hotels to adapt to the demands of the pandemic. There was some chat about the wipe down nature of Avid, but Barr was not inclined to make permanent changes - pointing out that, in the height of crises, it was tempting to think that the new way of operating was the only way of operating forever. But it was not.
Barr did not go down the road of some of the bullish US CEOs and start talking about vaccines in September, but the evidence of mortality rates in some countries suggests that treatment of Covid-19 is improving. This will pass. Hand sanitiser will not be a permanent addition to lobbies. Now it’s about who can last that long.