ATLANTA — InterContinental Hotels Group (IHG) has announced measures to reduce costs and preserve cash in light of the rapidly evolving COVID-19 situation.
“At this unprecedented time, our top priority remains the health and well-being 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,” says Keith Barr, CEO, IHG. “Demand for hotels is currently at the lowest levels we’ve ever seen. IHG has a robust business model and the measures we’re announcing today to reduce costs and preserve cash give us the capacity to manage the business through this unique environment and to support our owners during this incredibly difficult time.”
Cost actions being taken include challenging all discretionary costs and reducing salary and incentives, including substantial decreases for board and executive-committee members. These measures will result in a reduction of up to $150 million in business costs. Similar actions, along with a reduction in marketing spend, are being taken across IHG’s System Fund and action is being taken to contain costs in the company’s owned, leased and managed-lease hotels.
To support its owners and manage their cash flows, IHG has launched a package of new measures, including delaying renovations and relaxing brand standards.
“These were not easy choices and we’re mindful of the impact these decisions will have on our colleagues and shareholders. However, we believe these are essential to ensuring 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,” Barr adds.
During March, given the measures adopted by governments around the world to restrict travel and social contact, IHG is anticipating global RevPAR declines of around 60 per cent, with steeper declines in those markets most impacted by restrictions. The company notes cancellation activity for April and May, as well as current booking trends, indicate continued challenging conditions.
In Greater China, IHG currently has 60 hotels closed compared to 178 at the peak and, in recent days, has begun to see improvements in occupancy in this market, albeit at low levels.