Shares in Holiday Inn and Crowne Plaza hotels-owner InterContinental Hotels (IHG) jumped 6.75% to £42.71 on signs that it could be making a tentative recovery.

The market already knew its numbers for the six months to 30 June were going to be bad, and they were with revenue down 52% to $488 million, operating profit tumbling 82% to $74 million and adjusted earnings per share falling 90% to 14.3 cents.

Second quarter revenue per available room (RevPAR), a key hotel industry metric, for April through June was particularly bad, falling 74.7% and while occupancy rates during the quarter were just 25%.

The company also pulled its interim dividend, citing limited visibility of the pace and scale of market recovery.

IHG CONFIDENT WHEN MARKETS RECOVER

However, IHG did report that RevPAR for July is expected to improve to a 58% decline, while occupancy levels in comparable open hotels improved to 45%.

While such is IHG’s confidence in its ‘long-term growth prospects’ and the ‘strength of our brands and owner relationships’, the company added capacity during the first half of the year, opening more than 90 hotels and adding to its pipeline with an average of one new signing a day, including almost 100 for its Holiday Inn brand.

It also took voco, its upscale conversion brand, outside of EMEAA with initial signings in the US and Greater China.

Chief executive Keith Barr said the company is ‘seeing some very early signs of improvement as restrictions ease and traveller confidence returns’, adding that this give IHG confidence that it can ‘emerge strongly when markets recover’.

BUSINESS TRAVEL CHANGE A LONG-TERM PROBLEM

However, AJ Bell investment director Russ Mould highlighted that while reluctance to travel among holidaymakers could eventually dissipate, changes to business travel in future will be a long-term problem for IHG.

Mould said, ‘People are more comfortable with the idea of video conferencing rather than always having to do things face-to-face, they could well be looking for an excuse not to take a long flight, train or car journey for a couple of meetings of variable productivity.

‘For hard-pressed businesses, cutting down on travel expenses may well be an attractive option too. This seems the most acute long-term challenge facing the group as we emerge from the crisis.’

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Issue Date: 11 Aug 2020