Covid19 hotel development analysis: InterContinental Hotels Group [Infographic]
IHG is hoping its asset-light approach will help the company weather the global health crisis. (Picture: IHG)
In this exclusive analysis, TOPHOTELNEWS looks at IHG’s future prospects, and provides an overview of how the group and its hotel development pipeline have been affected by Covid19.
Covid19 threw the world’s hospitality and tourism industry into the deepest crisis it has ever experienced.
Now, it’s time to look at how some of the big names in the industry have been impacted by travel restrictions and lockdowns around the world.
We find out how InterContinental Hotel Group (IHG) has done since the beginning of this crisis.
IHG’s pipeline of projects
Despite already being one of the world’s largest hotel groups, IHG has kept on expanding its footprint globally in recent years. Today, the company has 453 projects in its pipeline across 16 brands.
How IHG’s projects are faring amid coronavirus
IHG’s current pipeline of 453 hotels in progress is impressive, especially given the current crisis the hotel industry is facing. While this may be a sign that IHG’s leadership believes in the travel industry’s long-term recovery, it is also important to note that the development of 51 properties has been put on hold, while nine projects have been cancelled as of 13 May 2020.
Speaking in a Q1 2020 earnings call at the start of May, IHG’s CEO Keith Barr said: “In the quarter, we opened 6,000 rooms, mostly in the first two months, but 1,100 opened in March. Approximately 14,000 rooms were signed, including 4,000 in March, for a new system size of approximately 882,000 rooms, a year-on-year increase of 4.6%.”
During a previous earnings call to coincide with the company’s final results for 2019 in February, meanwhile, Barr noted: “We have opened five or six hotels in China in 2020, so business is still moving. Where we might see interruption is in furniture, fixings and equipment ability, with items simply not manufactured and delivered, and in staff, but I will stress again this is a delay, not a stop.”
IHG’s share price development
Before Covid19 caused an unprecedented crisis in the hotel industry worldwide, IHG’s stock was relatively steady, trading at $65.45 on 19 February. After having been quite consistent around this rate for many months, its value dropped sharply to $28.46 by 19 March.
From then on it began recovering, reaching $34.34 by 3 April, and climbing back up to $49.51 by 29 April. This gradual improvement doubtless reflected the lifting of lockdowns in many countries, as well as reports of the economic recovery of China post-coronavirus, which have given investors new hope.
IHG through the course of Covid19
After a strong start to the year, IHG felt Covid19’s impact as strongly as other key players in the industry.
IHG recognised the threat Covid19 would pose early on, and Barr acknowledged the subject in his comments accompanying the company’s final results for 2019 in February. He added: “The fundamentals of our industry remain strong, and our cash-generative, resilient fee-based model, underpinned by a commitment to operate a responsible business, gives us the confidence to continue making the strategic investments that will drive our long-term growth.”
Later that month, the business said in its 2019 annual financial report that its asset-light business model and diverse brand portfolio would help the group get through the crisis.
To ensure the group would successfully get through times where many of its hotels had to close temporarily and demand significantly dropped the world over, though, IHG took dramatic cost-cutting measures in March. This included cancelling the dividend which had been announced in February, furloughing staff and reducing expenditures such as corporate travel and new hires.
As Barr explained at the time: “We are taking further steps to protect our cash-flow, including reducing our gross capital expenditure by ~$100m from 2019 levels and managing working capital.”
With additional support from the Bank of England in the form of a $740 million loan and total available liquidity of $2 billion, the company’s leadership remains optimistic that IHG will soon thrive again, especially given that the green shoots of recovery are already appearing in China and several other markets around the world.