IHG announce cost cutting measures to free up $150 million
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IHG announce cost cutting measures to free up $150 million
InterContinental Hotels Group has the announced there will be a "substantial" reduction in salaries for Board and Executive Committee members as part of a series of new measures designed to soften the financial blow of the coronavirus crisis.
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InterContinental Hotels GroupThe lobby of the InterContinental Melbourne.
InterContinental Hotels Group has stepped up its response to the coronavirus crisis, announcing changes to its business model amidst decreased demand for hotels.
A week after announcing it would be waiving cancellation fees for guests until the end of April, the company is set to introduce a series of cost-cutting measures to cope with the new financial environment.
IHG board members and executives will be among those to feel the pinch as "substantial" cuts are made to their salaries in order to free up $150 million.
IHG cost reduction measures - At a glance:
- Substantial reduction in the salaries of board members and executives.
- Reducing gross capital expenditure by circa $100 million from 2019 levels.
- Comprehensive package of measures including delaying renovations and relaxing brand standards.
- Taking action owned, leased and managed lease hotels to contain costs.
Other steps being taken to protect cashflow include reducing gross capital expenditure by circa $100 million from 2019 levels, as well as action in "owned, leased and managed lease hotels".
IHG CEO Keith Barr said while the decisions were not easy to make, they would be "essential" to the survival of business going forward.
"Demand for hotels is currently at the lowest levels we’ve ever seen," he said.
IHG CEO Keith Barr. Source: IHG
"IHG has a robust business model and the measures we are 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.
"It's important that 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.”
Data from IHG indicates the Group's Global RevPAR decreased 6 per cent across January and February, with a broadly flat performance in the US offset by declines in Greater China, which saw an almost 90 per cent decline in February.
The lobby of the InterContinental Hotel Sydney. Source: IHG
During March, given the measures adopted by governments around the world to restrict travel and social contact, IHG anticipates Global RevPAR declines of around 60 per cent, with steeper declines in those markets most impacted by restrictions.
Cancellation activity for April and May, and current booking trends, indicate continued challenging conditions.
Mr Barr said the Group would "continue to monitor the situation closely", with further commentary to be provided at its First Quarter trading update on 7 May 2020.
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