20th Mar 2020 08:31
(Alliance News) - InterContinental Hotels Group PLC said Friday demand is currently at the lowest level it has ever seen.
Shares in the Holiday Inn and Crowne Plaza owner were 13% higher in London on Friday morning at 2,699.50 pence each.
"At this unprecedented time, our top priority remains the health and wellbeing of our guests, colleagues and partners, and ensuring that in light of such a significant impact on the global economy and, in particular, on the travel industry, we take the right steps to protect the long-term health of our business," Chief Executive Keith Barr said.
He said demand for hotels is "currently at the lowest levels we've ever seen".
To combat this, IHG is hoping to save about USD150 million through salary cuts, including "substantial" reduction in salary and incentives from its board and executive committee.
Also, IHG will pull its final dividend of 85.9 US cents - saving about USD150 million - and said it will delay any further dividends until "visibility has improved".
"Similar actions, along with a reduction in marketing spend, are being taken across the System Fund in response to expected lower assessment fee receipts. We are also taking action in our owned, leased and managed lease hotels to contain costs," IHG added.
The hotel owner will also delay renovations and relax brand standards.
Turning to trading, IHG said its global revenue per available room was down 6% in January and February, with a flat performance in the US being offset by a catastrophic drop in Greater China. In February, RevPAR in Greater China was down 90% year on year.
IHG continued: "During March, given the measures adopted by governments around the world to restrict travel and social contact, we are anticipating Global RevPAR declines of around 60%, with steeper declines in those markets most impacted by restrictions."
Cancellations in April and May, and current booking trends, indicate further challenges ahead, IHG said.
In Greater China, IHG has 60 hotels closed compared to 178 at its peak, and in recent days has begun to see improvements in occupancy, albeit at low levels.
The company said it is conservatively leveraged.
IHG noted it has a staggered bond maturity profile, with the first maturity of GBP400 million not due for repayment until 2022. IHG also has access to a USD1.4 billion revolving credit facility, which is currently USD1.2 billion undrawn.
Together with its free cash flow generation, IHG believes it has "significant" liquidity.
Barr added: "These were not easy choices and we are mindful of the impact these decisions will have on our colleagues and shareholders. However, we believe that these are essential to ensuring that we come out of this as strong as we possibly can and ready to capitalise on what remains an industry with excellent long-term growth potential."
By Paul McGowan; [email protected]
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