Comment: IHG has what it takes to survive COVID-19
GlobalData analyst Ralph Hollister says despite RevPAR drops, IHG has plenty of cash to survive
Like many in the hospitality industry, IHG is dealing from a very difficult quarter and potential future quarters, with RevPAR, occupancy and other key performance indicators all down. However, the Group can take some degree of comfort knowing that its main competitors also find themselves in a very similar position. Occupancy levels in its open hotels are currently in the low to mid 20% range across the business. These figures illustrate that the company is still a long way from any kind of formal recovery. Infection rates in the US and Europe need to drop significantly so that restrictions on movement can be lifted and confidence within IHG’s target markets can be restored.
Until occupancy rates regain normality and international tourism flows are resumed, IHG finds itself in a positive position to deal with the economic impact COVID-19 is creating.
IHG said it now has access to US$1.4bn of cash on deposit and existing bank facilities are currently US$660m undrawn, taking total available liquidity to US$2bn.
With a recent £600m (US$745.2m) injection from the UK Government’s coronavirus aid scheme, the company has acquired further breathing space and increased its likelihood of navigating successfully through the pandemic.
Hotel giants such as IHG that emerge unscathed may be able to benefit from consolidation. Failing companies due to COVID-19 could provide ripe pickings for IHG, especially ones that align with its brand strategy.
About the author - Ralph Hollister is an associate analyst in the travel and tourism division at GlobalData. He specialises in the creation of thematic reports, mainly in relation to major technology themes in the tourism industry. Additionally, he produces PR insight in regards to breaking stories in travel & tourism and outlines key trends in travel, especially in niche/emerging forms of tourism.