InterContinental Hotels Group made the decision in July to
eliminate about 10 percent of its corporate staff, said IHG CEO Keith Barr
during a Tuesday second-quarter earnings call. The cuts are part of a $150
million cost-cutting plan that started this year and will be sustained into
2021.
"This necessary reduction in costs has sadly had to
involve looking at headcount across the business," Barr said. "Our
changes include a reduction in roles of around 10 percent at a corporate level,
which we announced internally in July, and we are doing all we can to support
any impacted colleague during this really difficult time."
The reductions come amid the worst crisis to hit the
hospitality industry. Despite signs of improvement from the performance trough
in April due to the Covid-19 pandemic, the near-term market remains uncertain,
and key metrics are still far below desired levels.
IHG's global revenue per available room declined 75 percent
year over year for the second quarter, which it had anticipated
in its earnings preview, and was down 51.7 percent for the first half. Occupancy
declined 30.6 percentage points during the half, and average daily rate was
down 12.1 percent for that period. The company is beginning to see a recovery,
Barr said, with July RevPAR declines expected to be 58 percent, up from April's
82 percent drop, and occupancy in July up to 45 percent from about 20 percent
in April. Revenues were $488 million for the half year ended June 30, down from
$1.01 billion at that point in 2019.
Of the company's roughly 5,900 global hotels, about 317 or 5
percent remain closed, compared with about 1,000 at the end of April. Still,
IHG had 77 signings during the second quarter and opened 47 hotels and broke
ground on 47 more, Barr said. During the first half of 2020, the company's net
rooms grew 3.2 percent to 883,000.
Regional Results
Second quarter RevPAR was down 69.3 percent year over year in
the United States, and down 46.8 percent for the first half of the year.
Occupancy is back up to about 45 percent in July, with RevPAR declines about 54
percent for the month. IHG's upper midscale and extended stay brands have
proved to be the most resilient, the company said. Net rooms grew 1.7 percent year
over year for the half in the Americas, and its pipeline was at 116,000 rooms as
of June 30.
Greater China, where the coronavirus was first reported, saw
improvements in the second quarter over its first quarter performance. RevPAR
was down 61.7 percent for the half of the year, but improved to a 59.2 percent
decline in the three months ended June 30. Average occupancy was greater than
50 percent in July, and 99 percent of the regions hotels are reopened. Net
rooms grew 9.9 percent year over year for the first half.
Business Travel Perspective
When asked about the business travel recovery, Barr said there
will be some shifts, and perhaps some long-term trends, "but I don’t think
this is the death of business travel by any means," he said. "It's
pretty hard to Zoom yourself on a family holiday or to Teams yourself on a big
convention or first-time meetings with a client you are going to do a huge deal
with.
"Fast forward you'll have still rising demand for
travel, rising emerging markets, those tailwinds will come back. You have to
remember, there is also a significant portion of business travel which is not
non-discretionary, which is why I think you've seen us hold up quite well
through this downturn. We still have a pretty significant amount of business
travel in our hotels as people have to travel from point A to point B to do
their job. They can't do it through technology, they have to be on site. That's
not the top-tier banker, but the person driving from Holiday Inn Express to
Holiday Inn Express to do their job. And that's here to stay.
"It would be inaccurate to say there won't be some
impact, because there will. But I don't think it's a material shift that business
travel will be down 10 percent, 20 percent, 30 percent going forward. I don’t
think anybody has that real view on it yet. After 9/11, I remember people
saying they would never get on planes again. And we all know what happened
decades of travel from there. I think it's just too early to call, and not all business
travel is equal."
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