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Demand for hotel rooms is at record lows, the company behind InterContinental and Holiday Inn hotels said on Friday, as it announced $150 million of cost cuts to help cope with travel restrictions and lockdowns caused by the coronavirus pandemic.
Travel and leisure businesses have been among the worst hit by the virus outbreak, with hundred of billions of dollars in business trips and holidays cancelled as countries impose draconian restrictions to try to curb its spread.
InterContinental Hotels Group (IHG) said it expected the revenue it gets globally from hotel rooms (RevPAR) to plunge by around 60% in March, with steeper declines in markets that have gone into lockdown.
It said cancellations for April and May and current booking trends pointed to continued challenging conditions, but added it had begun to reopen hotels in China, where the virus emerged.
IHG operates more than 5,900 hotels worldwide, with nearly 900,000 rooms across 100 countries. Half of its hotels are in the Americas and 35% in Europe, Middle East, Asia and Africa, while 6% are in China.
The Crowne Plaza, Regent and Hualuxe operator joined hundreds of other listed companies in withdrawing its final dividend and deferring any further decisions on payouts for now, while also cutting capital spending by around $100 million.
IHG has $1.2 billion in un-drawn cash available under a revolving credit facility if need be, it added, as companies look to their financial reserves to ride out a crisis that threatens to continue into the summer.
IHG shares, which had lost more half their value so far in 2020, were up 11% in early trade as battered stock markets regained some ground.
IHG said it had taken steps including reducing salaries, incentives and “substantial” cuts for board and executive committee members that would save $150 million in costs.
“These were not easy choices and we are mindful of the impact these decisions will have on our colleagues and shareholders,” CEO Keith Barr said.
“In Greater China we now have 60 hotels closed compared to 178 at the peak, and in recent days have begun to see improvements in occupancy, albeit at low levels,” IHG said.
However, the disease has spread far and wide, with deaths in Italy now surpassing those in China.