InterContinental Hotels hope to recover room revenue in China

Where some markets are already seeing signs of recuperation 

Aerial view of Shimao InterContinental Hotel in Shanghai, China. zhaojiankang/Shutterstock

In April, the average room revenue of InterContinental Hotels (IHG.L) went through a drastic 80 percent dip, reported Reuters. Since China is already seeing hints of recuperation in some markets, IHG has begun to implement stringent safety and cleaning processes, in hopes to recover from the past month.

The COVID-19 pandemic is the biggest obstruction the hotel industry has ever come up against, said Keith Barr, the chief executive at IHG. To restore customers’ trust, he said that they have vowed to meticulously clean public areas every one to two hours.

The hotel operator added that they are looking forward to the recovery of China, Australia and New Zealand, countries that have been doing well in containing the virus and where 90 percent of IHG’s local demand comes from.

In Greater China, the occupancy levels were at the mid-20 percent range, an increase of about five percent from mid-February. By the end of April, 10 hotels had to shut down, but the numbers are far less compared to the 178 closures a month before.

IHG hopes that their domestic business will recover first, especially in the United States, where only about 10 percent of their portfolio had to stop operating.

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“We are less exposed to large group meetings and events, which tends to be the first to fall away and the last to recover in a recessionary environment,” said Paul Edgecliffe-Johnson, the chief financial officer at IHG.

The operator’s shares have increased to 3.3 percent at 3545 pence by 1106 GMT from dropping to about 34 percent this year.

Overall, around 15 percent of their portfolio has shut down at the end of April, with half of their hotels in Asia, the Middle East, Europe and Africa closed. Nevertheless, they are planning to open their hotels in some countries that have started to ease their lockdown measures.

“The group is suffering and until the lockdowns are eased, the pain is likely to continue. It has access to USD2 billion in liquidity, so from that point of view it is in good shape,” said David Madden, an analyst at CMC Markets.

The USD2 billion in liquidity will give the hotel operator at least 18 months of headroom. Thus far, IHG has removed cancellation fees and established a ‘book now, pay later’ option for the rest of the year.